On January 2, 2013, Lapar Corporation purchased a machine for $50,000. Lapar paid shipping expenses of $500, as well as installation costs of $1,200. The company estimated that the machine would have a useful life of 10 years and a salvage value of $3,000. In January 2014, Lapar made additions costing $3,600 to the machine in order to comply with pollution-control ordinances. These additions neither prolonged the life of the machine nor increased the salvage value.

Required:

1. If Lapar records depreciation under the straight-line method, how much is the depreciation expense for 2014?

2. Assume Lapar determines the machine has three significant components as shown below:

If Lapar uses IFRS, what is the amount of depreciation that would be recorded?

Transcribed Image Text:

Component Amount Service Life Salvage Value $25,000 15,000 10 years 5 years 1,700 3 years $3,000 0 0