Question

On January 2​ 2018, Motors Inc. purchased an engine with a cost of​ $65,000. At the​ time, it was expected to last 5​ years, with a residual value of​ $1,000. Two years​ later, on January​ 2, 2020 a new part was added to the​ engine, to increase its productivity. The new part has a cost of​ $17,000. Motors Inc. revised their estimates to extend the expected useful life of the engine to 7​ years, and the estimated residual value to​ $2,000. The revised amortization expense staring January​2020, would​ be:

Answer 1

Amortization expense fro Year-2018
Cost of equipment			65000
Less: salvage value			1000
Depreciable cost			64000
Divide: Useful life			5
Annual amortization			12800
Accumulated amortization for 2 yrs	25600
Book value on Jan 2020		39,400
Add: Cost of new part		17,000
Total Value of equipment		56,400
Less: Revised residual value		2000
Depreciable cost			54400
Divide: Revised remaining life		5
Annual Amortization starting Jan20	10880
Answer is $ 10,880