Account for capital and revenue expenditures (expenses) and calculate depreciation expense (L O 2,4)
Global Electronics operates a manufacturing plant for production of its products. At the beginning of 2008, the accounting records for the company showed the following balances for its only piece of equipment, purchased at the beginning of 2005:
| Equipment | $94,000 |
| Accumulated depreciation | 54,000 |
During 2008, the following cash costs were incurred for repairs and maintenance on the equipment:
| Routine maintenance and repairs | $ 575 |
| Major overhaul of the equipment that improved efficiency | 30,000 |
The company uses straight-line depreciation and estimates the equipment will last for 5 years beginning in 2008 with a $4,000 estimated salvage value. The company’s fiscal year ends on December 31.
a. How much did the firm record for depreciation on the equipment at the end of 2008?
b. After the overhaul, at the beginning of 2008, what is the remaining estimated life?
c. What is the amount of depreciation expense the company will record for 2008?
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