Ron's Quik Shop bought machinery for $75000 on January 1 2016. Ron estimated the useful life to be 5 years with no salvage value and the straight-line method of depreciation will be used. On January 1 2017 Ron decides that the business will use the machinery for a total of 6 years. What is the revised depreciation expense for 2017?

Question

Quizplus · Accepted Answer

The original annual depreciation expense is $15,000 ($75,000 / 5 years). After one year, the book value is $60,000 ($75,000 - $15,000). With the revised useful life of 6 years total and 1 year already passed, there are 5 years remaining. The revised annual depreciation is $12,000 ($60,000 / 5 years).

Ron's Quik Shop Bought Machinery for $75000 on January 1