Randy’s Rowboats Ltd. purchased and began to use its first six rowboats for a total cost of $2,400. Randy believes the boats can be used for five years, providing the company with equal value each year. After five years, the boats will be worthless.
a. Use your best judgment to determine a reasonable amount to charge to amortization expense each year.
b. Find the book value (cost less amortization) of the boats for each of the five years they will be used.
c. If the company expects to sell the rowboats for $400 after five years, determine the reasonable amount to charge to amortization expense each year.