On December 31, 2012, before the books were closed, the management and accountants of Madrasa Inc. made the given determinations regarding three depreciable assets.
1) Depreciable asset A was purchased January 2, 2009. This originally cost $410,000 and for depreciation purposes, the straight-line method was originally selected. The asset was originally expected to be helpful for 10 years and encompass a zero salvage value. In year 2012, the decision was made to change the depreciation process from straight-line to sum-of-the-year's digits, and the estimates relating to useful life and salvage value remained unchanged.
2) Depreciable asset B was purchased January 3, 2008. This originally cost $259,500 and for depreciation purposes, the straight-line method was selected. The asset was originally expected to be helpful for 15 years and encompass a zero salvage value. In the year 2012, the decision was made to shorten the total life of this asset to 9 years and to estimate the salvage value at $2,600.
3) Depreciable asset C was purchased January 5, 2008. The asset's original cost was $193,100, and this amount was completely expensed in 2008. This specific asset has a 10-year useful life and no salvage value. The straight-line method was selected for depreciation purposes.
a) Income in 2012 before depreciation expense amounted to $422,000.
b) Depreciation expense on assets other than A, B, and C totaled $52,700 in year 2012.
c) Income in 2011 was reported at $410,000.
4. Avoid all income tax effects.
5. 100,800 shares of common stock were outstanding in the year 2011 and 2012.