The Donut Stop acquired equipment for $12,000. The company uses straight-line depreciation and estimates a...
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The Donut Stop acquired equipment for $12,000. The company uses straight-line depreciation and estimates a residual value of $2,800 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,200 from the original estimate of $2,800. Required: Calculate how much The Donut Stop should record each year for depreciation in years 3 to 6. Cost of the equipment Less: Accumulated Depreciation (Years 1 and 2) Book value, end of year 2 12,000 4,600 Less: New residual value New depreciable cost Remaining service life Annual depreciation in years 3 to 6 4 $ 1,838
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