On January 1, 2014, REP Replaced a Major Component in Plant

question 12

Essay

On January 1, 2014, REP replaced a major component in Plant A, which had been operating for 10 years (from construction date of the plant); its original cost as a part of the plant was $36,000. The replacement component cost $40,000 (cash) and has an estimated life of 25 years. Plant A is depreciated as one unit on the straight-line basis (not group or composite amortization system) and has an estimated life of 30 years (total). All residual values were zero. REP has a December 31 year-end and only accounts for amortization at year-end.
(a) Give the entry (entries) on January 1, 2014.
(b) At the end of 2014, what amount of amortization should be recorded on the replacement item? $____________________.

---

Definitions:

Legally Subordinate

Refers to a legal status where an entity or individual is considered to have fewer rights or powers in comparison to another in a given legal context.

Planter Class

A social and economic class in the antebellum South, composed of wealthy landowners who owned plantations and many slaves.

Paternalistic

An approach or system where individuals in positions of authority restrict the freedom and responsibilities of those subordinate to them, purportedly in the latter's best interest.

Cultural Influences

The impact that one culture or society has on another, often leading to changes or developments in language, customs, values, and art.