Changes in Estimates
The following independent cases describe facts concerning the ownership of racing bicycles.
(a) Maurizio Fon Dr .iest, winner of the 2006 Milan–San Remo cycling classic, purchased a new Colnago bicycle for $8,000 at the beginning of 2006. The bicycle was being depreciated using the straight line method over an estimated useful life of seven years, with a $1,000 salvage value. At the beginning of 2008, the Italian superstar paid $1,600 to upgrade the bicycle. As aresult, the useful life of the bicycle was extended by one year. The salvage value remained $1,000.
(b) John Museeuw, winner of his country’s own Tour of Flanders cycling classic in 2006, purchased a new Bianchi bicycle for $6,000 at the beginning of 2005. The bicycle was being depreciated using the double declining balance method over an estimated useful life of five years, with a $1,000 salvage value. At the beginning of 2006, when the Belgian superstar won at Flanders, the salvage value of his Bianchi (eventual selling price) jumped to $2,000.
(c) Gilbert Duclose Lasalle, winner of the 2005 and 2006 Paris Roubaix cycling classics, purchased a new Lemond Armstrong bicycle for $7,000 in 2004. The French superstar did not use his new bicycle during the 2004 season. However, in 2005 and 2006, Lasalle used his bicycle to win Paris Roubaix and logged 6,000 and 8,000 kilometers, respectively, each year. Lasalle estimated that the bicycle had a productive life of 20,000 kilometers. He did not use the bike in 2007, but in 2008 he decided to upgrade the bike with $2,000 of new components, giving the bicycle an additional 10,000 kilometers of productive use. During the 2008 season, he logged 12,000 kilometers on the bike. The estimated salvage value of the bicycle is $1,000.
Instructions: In each case, compute the depreciation for 2008.