Question
Pete's Propellers Company showed the following information in its Property, Plant, and Equipment Subledger regarding Machine #5027. Machine #5027 Component Date of purchase Depreciation Method*
Pete's Propellers Company showed the following information in its Property, Plant, and Equipment Subledger regarding Machine #5027.
| Machine #5027 | |||||||||
| Component | Date of purchase | Depreciation Method* | Cost | Est. Residual | Est.Life | ||||
| Single metal housing | Jan. 12/18 | SL | $ | 50,000 | $ | 8,000 | 15 yrs | ||
| Motor | Jan. 12/18 | DDB | 33,000 | 4,000 | 10 yrs | ||||
| Blade | Jan. 12/18 | SL | 12,000 | 1,200 | 5 yrs | ||||
| $ | 95,000 | ||||||||
*SL = Straight-line; DDB = Double-declining-balance On January 7, 2020, the machine blade cracked and it was replaced with a new one costing $11,800 purchased for cash (the old blade was scrapped). The new blade had an estimated residual value of $1,500 and an estimated life of five years and would continue to be depreciated using the straight-line method. During 2020, it was determined that the useful life on the metal housing should be increased to a total of 20 years instead of 15 years and that the residual value should be increased to $9,300. Required: 1. Prepare the entry to record the purchase of the replacement blade.
2. Calculate the total depreciation expense to be recorded on Machine #5027 for 2020.
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