Pasta, a restaurant specializing in fresh pasta, installed a pasta cooker in early 2007 at a cost of $11,800. The cooker had an expected life of five years and a residual value of $600 when installed. As the restaurant’s business increased, it became apparent that renovations would be necessary so the cooker’s output could be increased. In January 2010, Pasta spent $8,200 to install new heating equipment and $4,100 to add pressure-cooking capability. After these renovations, Pasta estimated that the remaining useful life of the cooker was 10 years and that the residual value was now $1,500.
1. Compute one year’s straight-line depreciation expense on the cooker before the renovations.
2. Assume that three full years of straight-line depreciation expense had been recorded on the cooker before the renovations were made. Compute the book value of the cooker after the renovations were made.
3. Compute one year’s straight-line depreciation expense on the renovated cooker.