Enid Inc. purchased a piece of equipment for $144,000 on June 1, 2007. The equipment had an $18,000 salvage value and a six-year useful life. At the end of 2008 and 2009, Enid paid $350 to have the equipment cleaned. During 2008 and 2009, respectively, Enid spent $145 and $198 on lubricating oil for the equipment. On June 2, 2010, Enid spent $7,000 on a new motor for the equipment. The motor should extend the life of the equipment for two years beyond the original estimated life; the equipment’s salvage value will not be affected.
(a) If Enid Inc. uses straight-line depreciation, how much depreciation is taken on the equipment in 2007?
(b) How should the
(1) Cleaning.
(2) Lubricating.
(3) Engine replacement be treated for accounting purposes?
(c) How much depreciation should Enid Inc. take on the equipment for the calendar years 2010 and 2011?