In Class Exercise: Changing the estimated life of an asset Assume that Alpha Communications paid $75,000 for equipment with a 15 year life and zero expected residual value. After using the equipment for six years, the company determines that the asset will remain useful for only five more years. Requirements: 1. Record depreciation expense on the equipment for year 7 by the straight-line method. 2. What is accumulated depreciation at the end of year 7 ? In Class Exercise: Changing the estimated life of an asset Everyday Hardware Consultants purchased a building for $540,000 and depreciated it on a straight-line basis over a 40 year period. The estimated residual value is $96,000. After using the building for 15 years, Everybody realized that wear and tear on the building would wear it out before 40 years and that the estimated residual value should be $80,000. Starting with the 16th year, Everybody began depreciating the building over a revised total life of 25 years using the new residual value. Journalize depreciation expense on the building for years 15 and 16