Depreciation of Special Components
Jackson Manufacturing acquired a new milling machine on April 1, 2003. The machine has a special component that requires replacement before the end of the useful life. The asset was originally recorded in two accounts, one representing the main unit and the other for the special component. Depreciation is recorded by the straight line method to the nearest month, residual values being disregarded. On April 1, 2009, the special component is scrapped and is replaced with a similar component. This component is expected to have a residual value of approximately 25% of cost at the end of the useful life of the main unit, and because of its materiality, the residual value will be considered in calculating depreciation. Specific asset information is as follows:
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Main milling machine: |
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Purchase price in 2003 |
$74,800 |
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Residual value |
$6,200 |
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Estimated useful life |
10 years |
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First special component: |
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|
Purchase price |
$12,000 |
|
Residual value |
$500 |
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Estimated useful life |
6 years |
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Second special component: |
|
|
Purchase price |
$16,500 |
What are the depreciation charges to be recognized for the years (1) 2003, (2) 2009, and (3) 2010?