Don's Copy Shop bought equipment for $450,000 on January 1, 2017. Don estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2018, Don decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2018?

Question

Quizplus · Accepted Answer

The equipment was initially depreciated over 3 years, so the annual depreciation was $150,000. After one year, $150,000 has been depreciated, leaving a book value of $300,000. With a revised useful life of 5 years total (4 remaining), the new annual depreciation is $300,000 / 4 = $75,000.

Don's Copy Shop Bought Equipment for $450,000 on January 1