Ron's Quik Shop bought machinery for $25,000 on January 1, 2010. 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, 2011, Ron decides that the business will use the machinery for a total of 6 years. What is the revised depreciation expense for 2011?
A) $4,000
B) $2,000
C) $3,333 d $5,000

Question

Quizplus · Accepted Answer

The correct answer is A. The revised depreciation expense for 2011 is $4,000. The original depreciation expense was $5,000 ($25,000 / 5 years). When the estimated useful life is revised to 6 years, the new depreciation expense becomes $4,167 ($25,000 / 6 years). However, since the machinery has already been used for one year, the depreciation expense for 2011 is only $4,000 ($4,167 - $1,000).

Ron's Quik Shop Bought Machinery for $25,000 on January 1