Michigan Corporation purchased a new truck on January 1, 2013 for $55,000 cash. Michigan estimated salvage value of $10,000 at the end of the useful life of 5 years. On January 1, 2015 Michigan had to replace the engine of the truck paying $4,500 cash. Due to the replaced engine, Michigan estimates that the truck will continue a productive life for another four years.
a) Prepare the journal entry to record the cost of the new engine.
b) Assuming straight-line depreciation is used; calculate the depreciation expense for 2015.