X Company had been depreciating a machine with an original cost of $125,000 and a salvage value of $15,000 over its estimated useful life of 10 years using straight-line depreciation. At the beginning of the seventh year, X Company determined that the machine will actually remain in use for a total of 12 years and will have a salvage value of $5,000. How much depreciation will X Company recognize in the seventh year?

The company will recognize 4,500 for depreciation expense related to this machine.

Explanation:

First step, calculate the book value at the beginning of the seventh year

purchase - salvage value = amount subject to depreciation

125,000 - 15,000 = 110,000 depreciable amount

depreciable amount / useful life = depreciation per year

110,000 / 10 = 11,000 per year

It was depreciate for 6 years

11,000 * 6 = 66,000 accumulated depreciation

book value = purchase - accumulated depreciation

125,000 - 66,000 = 59,000

Now, this will be depreciate over 12 years with a salvage value of 5,000

purchase - salvage value = amount subject to depreciation

59,000 - 5,000 = 54,000

depreciable amount / useful life = depreciation per year

54,000/12 = 4,500 depreciation per year

The company will recognize 4,500 for depreciation expense related to this machine.