On June 1, 2014, Montreal Corporation purchased a machine to process steel. The machine that cost...

On June 1, 2014, Montreal Corporation purchased a machine to process steel. The machine that cost $3,000,000 was purchased from Ontario Machine Inc. located in Toronto. Shipping amounted to $200,000, annual insurance on the machine was $25,000 while the installation cost was $85,000. Managers have estimated a 7 yearuseful life and a $200,000 salvage value (residual value). MontrealCorporation’s year-end is December 31st.

Required:

(a) The president of Montreal Corporation wants you to calculate amortization expense for the years ended December 31, 2014and December 31, 2015assuming the company chooses i) the straight-line method and ii) the double-declining balance method of amortization. Please show all your work.

(b) Assume that Montreal Corporation has chosen the straight-line method to amortize the asset. On January 1, 2016, management changed its initial estimate of the useful life of the asset. Based on further research, their engineering department now believes the total useful life of the asset is more likely to be 8 years. And the salvage value becomes $150,000. Based on this information, calculate the amortization expense for the year ended December 31, 2016.

Expert Solution

ekkarill92 answered 4 months ago

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