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LO 6-7: Show how continuing expenditures for operational assets affects financial statements (prerequisite LO 6-1)
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Assessment 5: On January 1, Year 1, Marino Moving Company paid $48,000 cash... LO 6-7
On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four year useful life and an $8,000 salvage value. Marino uses the straight-line method. On January 1, Year 3, Marino’s accounting records contained the following account balances:

Truck 48,000

Acc. Dep. (20,000)

Also, on January 1, Year 3 the company paid $10,000 to replace an engine that extended the useful life of the asset from a total of four years to a total of seven years. Based on this information, the amount of depreciation expense shown on the Year 3 income statement is

Multiple Choice

$9,200.

$6,000.

$5,200.

$2,000.