Fellingham Corporation purchased equipment on January 1, 2019, for $200,000. The company estimated the equipment would have a useful life of 10 years with a $20,000 residual value. Fellingham uses the straight-line depreciation method. Early in 2021, Fellingham reassessed the equipment's condition and determined that its total useful life would be only six years in total and that it would have no salvage value. How much would Fellingham report as depreciation on this equipment for 2021?

For computing the depreciation expense for 2021, first we have to determine the depreciation expense for 2019 and than book value which are shown below:

Depreciation expense would be

= (Original cost - residual value) ÷ useful life

= ($200,000 - $20,000) ÷ 10 years

= $18,000

Now the book value would be

= Original cost - depreciation expense × number of years

= $200,000 - $18,000 × 2 years

= $200,000 - $36,000

= $164,000

Now the depreciation expense for 2021 would be

= ($164,000 - $0) ÷ 4 years

= $41,000

The four years are come from

= 10 years - 6 years