Question

On January 2​ 2017, Motors Inc. purchased an engine with a cost of​ $55,000. At the​ time, it was expected to last 5​ years, with a residual valuevalue of​ $3,000. Three years​ later, on January​ 2, 2020 a new part was added to the​ engine, to increase its productivity. The new part has a cost of​ $27,000. Motors Inc. revised theit estimates to extend the expected useful life of the engine to 7​ years, and the estimated residual value to​ $2,000. The revised amortization expense staring January​ 2020, would​ be:

A.

​$10,400

B.

​$12,200

C.

​$23,800

D.

​$31,200

Answer 1

Answer Option B -$12,200

Jan-17
Purchase Cost	55,000
Estimated Life	5
Salvage Value	3,000
Amortization Expense	10,400
Ammortization for 3 years from 2017 to 2019	31,200
Jan-20
Net Book Value (55,000-31,200)	23,800
Add Additonal Part	27,000
Revised Value	50,800
Revised Remaining Life	4
Revised Salvage Value	2,000
Revised ammortization Expense	12,200