RJB Acquired an Asset, Which Cost $12,000 on January 1

question 35

Essay

RJB acquired an asset, which cost $12,000 on January 1, 2001, the estimated useful life was 6 years and residual value was $1,500. RJB has a December 31 year-end and adjusting entries are only made at year-end.
(a) Assume the retirement system is used and that shortly before the end of an asset's expected life, a replacement was purchased at a cost of $13,000. The $1,500 residual value proved to be correct. Under these conditions the amount of amortization expense recorded would have been: (1) for the first year of the original life, $________________; 2) for the last year of the original life, $____________________.
(b) Assume the same facts as in (a), except that the replacement system was used. Under these conditions, the amount of amortization expense recorded would have been: (1) for the first year of the original life, $________________; 2) for the last year of the original life, $____________________.
(c) Assume instead that the SYD method was used; amortization expense for the second year on the asset would be: $__________________.
(d) Assume instead that the DDB method was used; amortization expense for the second year on the asset would be: $_______________________.

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Definitions:

Economic Costs

The total value of all resources used in the production of goods or services, including both explicit and implicit costs.

Opportunity Costs

The potential benefits an individual, investor, or business misses out on when choosing one alternative over another.

Accounting Profit

The difference between total revenue and explicit costs, indicating the financial gain recorded in the books of accounts.

Entrepreneurial Talent

The unique set of skills, creativity, innovation, and risk-taking abilities that entrepreneurs possess to start and manage businesses.