The amount of depreciation expense in Year 3 is $16,667.
Data and Calculations:
Cost of Equipment purchased in Year 1 = $70,000
Estimated useful life = 7 years
Estimated salvage value = $0
Depreciable amount = $70,000 ($70,000 - $0)
Method of Depreciation = Straight-line method
Annual depreciation expense = $10,000 ($70,000/7)
Accumulated Depreciation after 2 years = $20,000
Net book value after two years = $50,000 ($70,000 - $20,000)
Re-estimated remaining useful life after the first two years = 3 years
Depreciation expense in Year 3 = $16,667 ($50,000/3)
Thus, the company should report a depreciation expense of $16,667 in Year 3.
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