Santayana Company purchased a machine on January 1, 2008, for $12,000 with an estimated salvage value of $3,000 and an estimated useful life of 8 years. On January 1, 2010, Santayana decides the machine will last 12 years from the date of purchase. The salvage value is still estimated at $3,000. Using the straight-line method, the new annual depreciation will be
A) $675.
B) $750.
C) $900.
D) $1,000.

Question

Quizplus · Accepted Answer

The machine's original depreciation was calculated as ($12,000 - $3,000) / 8 = $1,125 per year. After 2 years, $2,250 has been depreciated, leaving a book value of $9,750. With a revised useful life of 12 years total (10 remaining years from 2010), the new annual depreciation is ($9,750 - $3,000) / 10 = $675.

Santayana Company Purchased a Machine on January 1, 2008, for $12,000