A company purchased equipment on January 1, 2022, for $691,000. In 2022 and 2023, the company depreciated the asset on a straight-line basis with an estimated service life of eight years and a $27,000 residual value. In 2024, due to changes in technology, the company revised the service life to a total of four years with no residual value. What depreciation would the company record for the year 2024 on this equipment? Note: Round your answer to the nearest dollar amount. Multiple Choice O $115,167 O $110,667 O $262,500 O None of the other answer choices are correct.

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Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.