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An asset was purchased for $120,000 on january 1, year 1 and originally estimated to have a useful life of 10 years with a residual value of $10,000. at the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. calculate the third-year depreciation expense using the revised amounts and straight-line method.

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Asset: 120,000
Year 1: estimated useful life of 10 years. residual value of 10,000

120,000 - 10,000 = 110,000 / 10 years = 11,000 annual depreciation.

Start of year 3.
estimated useful life of 4 years. residual value of 2,000
120,000 - 2,000 = 118,000 / 4 = 29,500 annual depreciation.
29,500 x 2 = 59,000
11,000 x 2 = 22,000

59,000 - 22,000 = 37,000

59,000 + 37,000 = 96,000 / 2 = 48,000 annual depreciation for year 3 and year 4.

Beginning Balance:   120,000
Less: Depreciation:
Year 1    11,000
Year 2    11,000
Year 3     48,000
Year 4     48,000          (118,000)
Residual Value                  2,000

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