Final answer:
The straight-line depreciation for the third year after adjusting the useful life and accounting for the past depreciation is $1,600, corresponding to option B.
Step-by-step explanation:
Leo's Lawncare initially purchased equipment with a cost of $15,000 and a residual value of $5,000 spreading over a 10-year lifespan. To calculate the annual depreciation using the straight-line method, we deducted the residual value from the cost and divided by the useful life. Thus, for the initial 2 years, the depreciation per year was ($15,000 - $5,000) / 10 = $1,000.
After two years, they revised the useful life to a total of 7 years (2 years past and 5 years future), with the residual value remaining at $5,000. The revised annual depreciation for the remaining 5 years would then be calculated based on the book value at the end of year 2 ($15,000 cost - $2,000 accumulated depreciation) minus the residual value, all divided by the revised useful life (5 years). This results in ($13,000 - $5,000) / 5 = $1,600 depreciation for each of the remaining 5 years.
Therefore, the depreciation under the straight-line method for the third year would be $1,600, which corresponds to option B.