On December 31, 2014, before the books were closed, the management and accountan

Question

On December 31, 2014, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three pieces of equipment.

Additional data:

1. Equipment A was purchased January 2, 2011. It originally cost $460,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2014, the decision was made to change the depreciation method from straight-line to sum-of-the-years’ digits, and the estimates relating to useful life and salvage value remained unchanged. 2. Equipment B was purchased January 3, 2010. It originally cost $262,500 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero salvage value. In 2014, the decision was made to shorten the total life of this asset to 9 years and to estimate the salvage value at $2,500. 3. Equipment C was purchased January 5, 2010. The asset’s original cost was $111,100, and this amount was entirely expensed in 2010. This particular asset has a 10-year useful life and no salvage value. The straight-line method was chosen for depreciation purposes.

Explanation / Answer

1) $ 234,806

2)

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