Final answer:
To calculate the depreciation expense for Year 3, subtract the number of years already depreciated from the original estimated life to get the remaining life. Then, divide the difference between the original cost and salvage value by the remaining life. The depreciation expense for Year 3 would be approximately $40,333.33 (rounded to the nearest dollar).
Step-by-step explanation:
To calculate the depreciation expense using the straight-line method, you need to know the original cost, salvage value, and estimated life of the equipment. In this case, the original cost is $260,000, the salvage value is $18,000, and the estimated life is 8 years. After depreciating the equipment for 2 years, we need to calculate the remaining life and the annual depreciation expense for Year 3.
To calculate the remaining life, subtract the number of years already depreciated (2 years) from the original estimated life (8 years) to get 6 years remaining. Now, to calculate the annual depreciation expense for Year 3, divide the difference between the original cost and the salvage value by the remaining life:
Depreciation Expense = (Original Cost - Salvage Value) / Remaining Life
Substituting the given values into the formula:
Depreciation Expense = ($260,000 - $18,000) / 6
Depreciation Expense = $242,000 / 6
Depreciation Expense = $40,333.33
Therefore, the depreciation expense for Year 3 would be approximately $40,333.33 (rounded to the nearest dollar).