Leo's Lawncare purchased equipment on January 1.The cost was $15,000,and the equipment had a residual value of $4,000.The equipment was given a useful life of 7 years.After the end of two years,it was determined that the equipment would be obsolete in 3 more years and the residual value would still be $4,000.What will be the depreciation under the straight-line method to the nearest dollar be for the third year?

Question

Quizplus · Accepted Answer

The initial depreciation was calculated over 7 years: ($15,000 - $4,000) / 7 = $1,571 per year. After 2 years, the book value is $15,000 - (2 * $1,571) = $11,858. With 3 years remaining and a residual value of $4,000, the new depreciation is ($11,858 - $4,000) / 3 = $2,619 per year.

Leo's Lawncare Purchased Equipment on January 1