Question 4 On December 31, 2012, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three depreciable assets. 1. Depreciable asset A was purchased January 2, 2009. It originally cost $500,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2012, the decision was made to change the depreciation method from straight-line to sum-of-the-years digits, and the estimates relating to useful life and salvage value remained unchanged. 2. Depreciable asset B was purchased January 3, 2008. It originally cost $243,000 and, for depreciation purposes, the straight-line method was chosen. The asset was or
iginally expected to be useful for 15 years and have a zero salvage value. In 2012, the decision was made to shorten the total life of this asset to 9 years and to estimate the salvage value at $3,200. 3. Depreciable asset C was purchased January 5, 2008. The assets original cost was $154,900, and this amount was entirely expensed in 2008. This particular asset has a 10-year useful life and no salvage value. The straight-line method was chosen for depreciation purposes. Additional data: 1. Income in 2012 before depreciation expense amounted to $405,000. 2. Depreciation expense on assets other than A, B, and C totaled $50,100 in 2012. 3. Income in 2011 was reported at $349,000. 4. Ignore all income tax effects. 5. 129,200 shares of common stock were outstanding in 2011 and 2012.