The following information is available on a depreciable asset:

Purchase date: January 1, Year 1

Purchase price: $85,000

Salvage value: $10,000

Useful life: 10 years

Deprecation method: straight line

The asset's book life is $70,000 on January 1, Year 3. On that date, management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000. Based on this information the amount of depreciation expense the company should recognize during year 3 would be:

a. $7,000

b. $7,500

c. $8,125

d. $6,500

e. $8,750