Ron's Quik Shop bought machinery for $75,000 on January 1, 2020.Ron estimated the useful life to be five years with no salvage value, and the straight-line method of depreciation will be used.On January 1, 2021, Ron decides that the business will use the machinery for a total of six years.What is the revised depreciation expense for 2021?

Question

Quizplus · Accepted Answer

The original depreciation expense per year was $15,000 ($75,000 / 5 years). With the revision to a 6-year total useful life starting from 2020, and one year already depreciated, there are now 5 remaining years. The book value at the beginning of 2021 is $60,000 ($75,000 - $15,000). Dividing this by the remaining 5 years gives a revised annual depreciation of $12,000.

Ron's Quik Shop Bought Machinery for $75,000 on January 1