Nanki Corporation purchased equipment on 1/1/07 for $650,000. In 2007 and 2008, Nanki depreciated the asset on a straight-line basis with an estimated useful life of 8 years and a $10,000 residual value. In 2009, due to changes in technology, Nanki revised the useful life to a total of six years with no residual value. What depreciation would Nanki record for the year 2009 on this equipment?
A)$108,333.
B)$106,667.
C)$122,500.
D)None of these is correct.The depreciation for 2007 and 2008 was 2 [($650,000 10,000) 8] = $160,000.This leaves a book value of $490,000 .

Question

Quizplus · Accepted Answer

In 2009, the remaining useful life of the equipment is 6-2=4 years (since 2 years have already been depreciated). The depreciable cost is $650,000 - $10,000 = $640,000. Therefore, the annual depreciation expense for 2009 would be ($640,000 / 4) = $160,000.

Nanki Corporation Purchased Equipment on 1/1/07 for $650,000