Nicholson Company purchased equipment on January 1, 2010, for €20,000 with an estimated residual value of €5,000 and estimated useful life of 8 years.On January 1, 2012, Nicholson decided the equipment will last 12 years from the date of purchase.The residual value is still estimated at €5,000.Using the straight-line method the new annual depreciation will be:

Question

Quizplus · Accepted Answer

The equipment's book value at the beginning of 2012 is €17,500 (€20,000 - 2 years of depreciation at €1,875 per year). With a new useful life of 12 years from 2010, there are 10 years remaining. The new annual depreciation is (€17,500 - €5,000) / 10 = €1,125.

Nicholson Company Purchased Equipment on January 1, 2010, for €20,000