Reference no: EM132836744

Jade Company acquired a new milling machine on April 1,2008. The machine has a special component that required replacement before the end of the useful life. The asset was originally recorded in two accounts, one representing the main unit and the other for the special component. Depreciation is recorded by the straightline method and residual value is disregarded. On April 1, 2014, the special component is scrapped and is replaced with a similar component. This new component is expected to have a residual value of approximately 20% of cost at the end of the useful life of the main unit, and because of materiality, the residual value will be considered in calculating depreciation.

Main milling machine:

Purchase price in 2008 7,500,000
Residual value 100,000
Estimated useful life 10 years

First special component:

Purchase price 1,200,000
Residual value 60,000
Estimated useful life 6 years

Second special component:

Purchase price 2,000,000
Residual value (20% x 2,000,000) 400,000

Problem 1: What is the total depreciation for 2014?