Nicholson Company purchased equipment on January 1, 2019, for $80,000 with an estimated salvage value of $20,000 and an estimated useful life of eight years.On January 1, 2021, Nicholson decided the equipment will last 12 years from the date of purchase.The salvage value is still estimated at $20,000.Using the straight-line method, the new annual depreciation will be

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The original annual depreciation was ($80,000 - $20,000) / 8 = $7,500. After two years, accumulated depreciation is $15,000. The book value at January 1, 2021, is $80,000 - $15,000 = $65,000. The remaining life is 10 years (12 total - 2 used). The new annual depreciation is ($65,000 - $20,000) / 10 = $4,500.

Nicholson Company Purchased Equipment on January 1, 2019, for $80,000