[FinancialAccoun]

Water company purchased a bottling machine on January 1, 2005 for $250,000. The estimated useful life is 25 years and they are using straight-line amortization. During 2007, they spent $46,000 on the machine to double its capacity and $5,000 on routine cleaning. What should the amortization expense be for 2007?


$30,000


12,000


$12,200


$10,000


The answer is 12,000 but I do not get how it is. Please explain thank you

[CaptainForest]

2005 Amortization:
250,000 / 25 = 10,000

Therefore, it will also be 10,000 for the 2006 amortization expense.

2007 Amortization:
Value of the Machine to be amortized = 250,000 – 10,000 – 10,000 = 230,000

Subtract the 10,000 x 2 because of 05 and 06 amortization.

You must also add the extra improvements of 46,000 to it (but not the routine cleaning of 5,000)

Therefore, value of machine is 230,000 + 46,000 = 276,000

2007 Amortization Expense = 276,000 / 23 = 12,000

[FinancialAccoun]

Oh thank you thank you for the reply I got it before I saw your answer but it made it clearer to me now. Say can I get your email address because I have final exam and I need your help