The following independent cases describe facts concerning the ownership of

The following independent cases describe facts concerning the ownership of racing bicycles.

(a) Piero Niccolo, winner of the 2009 Milan–San Remo cycling classic, purchased a new Fierro bicycle for $6,500 at the beginning of 2009. The bicycle was being depreciated using the straight-line method over an estimated useful life of four years, with a $1,500 salvage value. At the beginning of 2011, the Italian superstar paid $900 to upgrade the bicycle. As a result, the useful life of the bicycle was extended by one year. The salvage value remained $1,500.

(b) Bart Gysel, winner of his country’s own Tour of Flanders cycling classic in 2009, purchased a new Lampacht bicycle for $7,400 at the beginning of 2008. The bicycle was being depreciated using the double-declining-balance method over an estimated useful life of seven years, with a $2,000 salvage value. At the beginning of 2009, when the Belgian superstar won at Flanders, the salvage value of his Lampacht (eventual selling price) jumped to $3,000.

(c) Jacques Arouet, winner of the 2008 and 2009 Paris-Roubaix cycling classics, purchased a new Tonnerre bicycle for $8,000 in 2007. The French superstar did not use his new bicycle during the 2007 season. However, in 2008 and 2009, Arouet used his bicycle to win Paris-Roubaix and logged 7,500 and 9,000 kilometers, respectively, each year. Arouet estimated that the bicycle had a productive life of 25,000 kilometers. He did not use the bike in 2010, but in 2011 he decided to upgrade the bike with $1,750 of new components, giving the bicycle an additional 11,000 kilometers of productive use. During the 2011 season, he logged 11,500 kilometers on the bike. The estimated salvage value of the bicycle is $1,500.


Instructions:

In each case, compute the depreciation for 2011.


Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...

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