Inflation Accounting

Scenario
An asset is acquired at a cost of $10,000 with a five-year life and no anticipated salvage value. Straight-line depreciation is considered appropriate. The asset was acquired on January 2, 2000. Price indexes for the five years are:
<Tab/>2000<Tab/>2001<Tab/>2002<Tab/>2003<Tab/>2004
Fixed asset index<Tab/>100<Tab/>95<Tab/>108<Tab/>120<Tab/>125
General price index<Tab/>100<Tab/>110<Tab/>115<Tab/&…