Company ABZ invested $200,000 cash in new equipment at the beginning of 2005. The equipment was depreciated evenly over 10 years with an expected salvage value of $10,000. In 2008, inflation hit the economy hard, raising the CPI from 200 to 245. It is estimated that it would cost $400,000 to replace the machine

1. According to the GPP theory, how should the company represent the equipment on its balance sheet at the end of 2008? How much depreciation expense will ABZ recognize in 2009 for the equipment? What are the corresponding journal entries for the change in value?

2. According to current cost accounting, how should the company represent the equipment on its balance sheet at the end of 2008? How much depreciation expense will ABZ recognize in 2009 for the equipment? What are the corresponding journal entries for the change in value?