Henry purchased an asset on January 1, Year XXX1 and his company uses straight line depreciation method.

January 1, Year XXX1 Purchased equipment for $18,200

Estimated life of the asset 5 Years

Estimated salvage value $6,100

January 1, Year XXX3Made a major repair that improved the quality of the output but did not affect the life and salvage value of the asset. Henry decided to capitalize the cost of repair.

Major repair made on January 1, Year XXX3 costed$3,510 to Henry

January 1, Year XXX5 Had the equipment completely overhauled that is expected to extend the life of the asset but the salvage value is unaffected.

Cost of the overhaul $7,480

As a result of the overhaul, the useful life of the asset increased from 5 years to7 Years

Required:

a) Find the depreciation expense for Year XXX1.

b) What effect did the decision to capitalize the major repair expense have on the historical cost and the accumulated depreciation of this asset? Give the revised historical cost and accumulated depreciation for the asset after capitalization on January 1, Year XXX3.

c) Find the depreciation expense for Year XXX3.

d) What effect did the decision to capitalize the overhaul expense have on the historical cost and the accumulated depreciation of this asset? Give the revised historical cost and accumulated depreciation for the asset after capitalization on January 1, Year XXX5.

e) Find the depreciation expense for Year XXX5.