A company purchases equipment for $ 10,000 and originally estimates useful life of 4 years and...
A company purchases equipment for $ 10,000 and originally estimates useful life of 4 years and a residual value of $1,000 to be depreciated using straight-line method. After 2 full years, the company revises the useful life to 6 years with $0 residual value. Depreciation expense for the remaining would be :
A) $667
B) $1375
C) $1250
D) $875
Homework Answers
Depreciation = (Cost - Salvage value) / useful life
= (10,000-1,000)/4 = 2250 per year
Book value after 2 years = 10,000 - (2,250) = 55,000
New depreciation = (5500-0)/ 4 = 1375
Option B is the answer
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