Problem
At the beginning of 2000, Berube Company acquired equipment costing $40,000. It was estimated that this equipment would have a useful life of five years and a residual value of $4,000. The straight-line method of amortization was considered the most appropriate to use with this type of equipment, and amortization is to be recorded at the end of each year.
At the beginning of 2002 (the third year of the equipment's life), the company's engineers reconsidered their expectations, and estimated that the equipment's useful life would probably be six years (in total) instead of five years.
The estimated residual value was not changed. Three years later, at the beginning of 2005, the estimated residual value was reduced to $2500.
Create a chart similar to the practice exercise for this section to illustrate the changes in amortization over the years.