Exercise 7-14A Determine depreciation expense for a change in depreciation estimate (LO7-4)

Exercise 7-14A Determine depreciation expense for a change in depreciation estimate (L07-4) The Donut Stop acquired equipment for $20,000. The company uses straight-line depreciation and estimates a residual value of $2,000 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 $1,000 from the original estimate of $2,000. 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 Less: New residual value New depreciable cost Remaining service life Annual depreciation in years 3 to 6