Fernbank Farms purchased a tractor at the beginning of 2018 at a cost of $80,000. The tractor had an estimated life of 7 years, an estimated residual value of $10,000, and will be depreciated using the straight-line method. On January 1, 2021, the company made major repairs of $25,000 to the tractor that significantly extended the life of the asset. Starting with 2021, the tractor has a remaining life of 5 years and a new salvage value of $15,000.

What is the trucks book value on January 1, 2021 (before major repairs)?

1.$80,000

2.$70,000

3.$50,000

4.$40,000

Refer to Fernbank Farms in above. What amount should be recorded as depreciation expense each year starting in 2021?

1.$10,000

2.$15,000

3.$0

4.$12,000