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.

Required:
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.

a) To prepare the journal entry to record the cost of the new engine, you need to debit the appropriate asset account and credit the cash account. Here's how you can do it:

1. Identify the asset account for the truck. In this case, it would be "Truck" or "Truck Asset."

2. The cost of the new engine is $4,500. Debit the Truck account for $4,500 to increase the value of the asset:

Debit: Truck (asset account) - $4,500

3. The payment for the new engine was made in cash. Credit the Cash account for $4,500 to decrease the cash balance:

Credit: Cash - $4,500

The journal entry to record the cost of the new engine is:

Debit: Truck - $4,500
Credit: Cash - $4,500

b) To calculate the depreciation expense for 2015, we will use straight-line depreciation. Straight-line depreciation assumes that the asset depreciates evenly over its useful life.

1. Determine the initial cost of the truck. In this case, it is $55,000.

2. Determine the estimated salvage value of the truck at the end of its useful life. In this case, it is $10,000.

3. Determine the useful life of the truck. In this case, it is 5 years (prior to the engine replacement).

Depreciable Cost = Initial Cost - Salvage Value
= $55,000 - $10,000
= $45,000

Annual Depreciation Expense = Depreciable Cost / Useful Life
= $45,000 / 5
= $9,000

Since the engine was replaced on January 1, 2015, the remaining useful life becomes 4 years.

Depreciation Expense for 2015 = Annual Depreciation Expense * (Remaining Useful Life / Original Useful Life)
= $9,000 * (4 / 5)
= $7,200

Therefore, the depreciation expense for 2015 is $7,200.