On January 1, 2014, REP replaced a major component in Plant A, which had been operating for 10 years (from construction date of the plant); its original cost as a part of the plant was $36,000. The replacement component cost $40,000 (cash) and has an estimated life of 25 years. Plant A is depreciated as one unit on the straight-line basis (not group or composite amortization system) and has an estimated life of 30 years (total). All residual values were zero. REP has a December 31 year-end and only accounts for amortization at year-end.
(a) Give the entry (entries) on January 1, 2014.
(b) At the end of 2014, what amount of amortization should be recorded on the replacement item? $____________________.

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The Answer of On January 1, 2014, REP replaced a major component in Plant A, which had been operating for 10 years (from construction date of the plant); its original cost as a part of the plant was $36,000. The replacement component cost $40,000 (cash) and has an estimated life of 25 years. Plant A is depreciated as one unit on the straight-line basis (not group or composite amortization system) and has an estimated life of 30 years (total). All residual values were zero. REP has a December 31 year-end and only accounts for amortization at year-end.
(a) Give the entry (entries) on January 1, 2014.
(b) At the end of 2014, what amount of amortization should be recorded on the replacement item? $____________________.

On January 1, 2014, REP Replaced a Major Component in Plant