To me it seems like the way the solution goes through the problem still breaks the asset down into coponents. Sure the original 2000 for the original rotating cutter was used in the original calculation, however we’re depreciating the added new cutter separately. Bit confused.
I am also a bit confused, the example is very long, you might need to provide a few more details about which part your are struggling with.
I think you are referring to solution 2 and the treatment of the new cutter under the non-component method. Again, they are doing a horrible job at explaining this, here it is even worse because there is no explanation at all, but instead they just expect you to figure it out by providing one example.
Notice that for regular depreciation methods (i.e., without splitting the cost of an asset into separate components), component replacement is treated as a repair/maintenance expense… So when you purchase the new equipment you pretty much depreciate that as if it were a new and separate item, but you add the depreciation expense to the originial unit.
Yes you are correct that I was referring to 2. Yep no explanation.
Hmm, ok, I think I get what you’re saying. Makes sense I guess. Thanks.