Carpenters, Inc., a manufacturing company, acquired equipment on January 1, 2017, for $ 600,000. Estimated useful life of the equipment was seven years and the estimated residual value was $ 18,000. On January 1, 2020, after using the equipment for three years, the total estimated useful life has been revised to nine total years. Residual value remains unchanged. The company uses the straight-line method of depreciation.
Required:
Calculate depreciation expense for 2020.

$55,428.57

Explanation:

Depreciation is the systematic allocation of the cost of an asset to the income statement over the estimated useful life of that asset.

It is determined as the depreciable value of the asset over the estimated useful life of the asset where the depreciable value is the difference between the cost and salvage value of the asset

Mathematically,  

Depreciation = (Cost - Salvage value)/Estimated useful life

Depreciation = (600,000 - 18,000) / 7

= $83,142.86

On January 1, 2020, after using the equipment for three years,

Asset Net book value

= $600,000 - 3($83,142.86)

= $350,571.43

the total estimated useful life has been revised to nine total years thus remaining 6 years and residual value is the same

Depreciation expense for 2020

= ($350,571.43 - $18,000) / 6

= $55,428.57

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