Don's Copy Shop bought equipment for $450,000 on January 1, 2020.Don estimated the useful life to be three years with no salvage value, and the straight-line method of depreciation will be used.On January 1, 2021, Don decides that the business will use the equipment for a total of five years.What is the revised depreciation expense for 2021?

Question

Quizplus · Accepted Answer

The equipment's book value at the beginning of 2021 is $300,000 ($450,000 - $150,000). With a revised useful life of 5 years, 4 years remain. The new annual depreciation is $75,000 ($300,000 / 4).

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