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:

Note Receivable

A financial asset representing a promise to receive a definite amount of money at one or more specified future dates.

Interest Revenue

Income received from interest-bearing financial assets, such as bonds or savings accounts.

Loss on Sale

The negative financial difference between the sale price of an asset and its book value.

Note Discounted

A financial term referring to a note that is sold for less than its face value before its maturity, usually to improve liquidity.