TANGIBLE ASSETS $-$ Problem $1(6$ points$)$

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a$.$ Freeloads Corp. purchased a $$300,000$ machine on $\frac{1}{1}\frac{?}{2003},$ with an expected total useful life of $20$ years and a salvage value of $$40,000.$ Calculate the annual depreciation expense under the straight$-$line method.

b$.$ On $1/1/2007$ Freeloads Corp. spends $$40,000$ in a capital improvement to upgrade the machine frame and correspondingly revises the estimate of the residual value to $$58,000$ and the estimate of total useful life to $27$ years. Calculate the straight$-$line depreciation for $2007.$

c$.$ On $2/1/2006$ Freeloads Corp. spends $$2,500$ cash on regular repairs and maintenance of the machine. What's the financial statements effect?

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