The Donut Stop acquired equipment for $23,000. The company uses straight-line depreciation and estimates a residual value of $3,400 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 $2,000 from the original estimate of $3,400.

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 (year 1 & 2):

Book value, end of year 2:

Less: new residual value:

New depreciable cost:

Remaining service life:

Annual depreciation in years 3 to 6