Using the data from BE11- 9, compute the depreciation for the first two years and determine the net book value at the end of the second year, assuming Hermit Associates is an IFRS reporter that identifies the casing and engine as significant components of the machine. Attribute $ 100,000 of the cost to the casing, which has an estimated useful life of 12 years and a $ 30,000 residual value. Attribute the remaining $ 150,000 cost to the engine, which Hermit estimates to have a useful life of 8 years and a $ 20,000 residual value. Assume the straight- line method is used.
In a BE11- 9 Hermit Associates acquired a machine on January 1 at a cost of $ 250,000. Hermit estimates that the machine has a useful life of 10 years and a $ 50,000 residual value. Compute the depreciation expense for the first two years and determine the net book value at the end of the second year, assuming the straight- line method is used.