Question

Component Depreciation: You have been asked to consider the following situations.
Case A The company purchased a machine for $ 50,000 cash. It is estimated the machine will have a useful life for 10 years but it has a part that will need to be replaced every two and a half years. The cost to replace this part is $ 500.
Case B The company purchased a second machine for $ 40,000 cash. It is estimated the machine will have a useful life for 10 years but it has a part that will need to be replaced every two years. The cost to replace this part is $ 8,000.
Case C The company purchased a third machine for $ 100,000 cash. This machine requires a major overhaul every three years that costs $ 25,000.

Required:
For which machines is it likely there would be component depreciation, and why?



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  • CreatedFebruary 17, 2015
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