Royal Company Purchased a Dump Truck at the Beginning of 2012

Multiple Choice

Royal Company purchased a dump truck at the beginning of 2012 at a cost of $50,000.The truck had an estimated life of 5 years and an estimated residual value of $20,000.On January 1,2014,the company made major repairs of $30,000 to the truck that extended the life 3 years.Thus,starting with 2014,the truck has a remaining life of 5 years and a new salvage value of $8,000.Royal uses the straight-line depreciation method When calculating depreciation for 2014,Royal should

A) add the $30,000 to the book value at December 31,2013 and then allocate the revised basis over the remaining adjusted useful life of 5 years.
B) report the effect of the change in life as an expense on the income statement in 2012.
C) ignore the change in life on the original cost of $50,000 and depreciate the additional $30,000 cost separately over its useful life.
D) expense the $30,000 and depreciate the original cost of $50,000 over its revised estimated total live of 7 years.