Question

Yakima Wheat Company acquired harvesting equipment for $90,000 with an expected useful life of 5 years and a $10,000 expected residual value. Yakima Wheat used straight-line depreciation. During its fourth year of service, cash expenditures related to the equipment were as follows:
1. Oiling and greasing, $200.
2. Replacing belts and hoses, $450.
3. Major overhaul during the final week of the year, including the replacement of an engine. The useful life of the equipment was extended from 5 to 7 years. The cost was $27,000. The residual value is now expected to be $11,000, instead of $10,000. Indicate in words how each of the three items would affect the income statement and the balance sheet in the fourth year. Prepare a tabulation that compares the original depreciation schedule with the revised depreciation schedule.



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  • CreatedFebruary 20, 2015
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