To illustrate, assume that a compan

To illustrate, assume that a company acquires a $10,000 asset estimated to have a 5-year useful life and no residual value. Under the straight-line method, the annual depreciation expense is $2,000. At the end of the third year, accumulated depreciation is $6,000, and the asset has an undepreciated cost (or book value) of $4,000.
At the beginning of the fourth year, management decides that the asset will last for 5 more years. The revised estimate of useful life is, therefore, a total of 8 years. The depreciation expense to be recognized for the fourth year and for each of remaining years is $800, computed as follows: