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:

Insurance

A contractual arrangement that provides financial protection or reimbursement against losses from an insurance company.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.

Indirect Expenses

Indirect expenses are costs that cannot be directly attributed to a specific cost object, such as overhead or administrative expenses.

Direct Expenses

Direct expenses are costs that can be directly tied to the production or procurement of specific goods or services, such as raw materials and labor.