Fiona's Italian Market purchased a delivery truck for deliveries for $25,000 at the beginning of 2019. The truck has an estimated life of 5 years, and an estimated residual value of $5,000. The company plans to use the straight-line depreciation method. At the beginning of 2020, the company spent $4000 to replace the truck's transmission. This resulted in a 2-year extension of useful life, but no change in residual value.
A)What type of cost is the $4,000? Explain.
B)Calculate the asset's book value at the end of 2019.
C)Calculate depreciation expense for 2020.

Question

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The Answer of Fiona's Italian Market purchased a delivery truck for deliveries for $25,000 at the beginning of 2019. The truck has an estimated life of 5 years, and an estimated residual value of $5,000. The company plans to use the straight-line depreciation method. At the beginning of 2020, the company spent $4000 to replace the truck's transmission. This resulted in a 2-year extension of useful life, but no change in residual value.

Fiona's Italian Market Purchased a Delivery Truck for Deliveries for $25,000