Question

Starting questions 1. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by (a) the straight-line method and (b) the double-declining-balance method a. Straight-line method Accumulated Depreciation, Book Value, End of Year End of Year Depreciation Expense Year 3. 4. 2.

Answer 1

1. A) Straight Line Method

Year	Depreciation Expanse	Accumulated Depreciation And of Year	Book Value And of Year
1	$ 142,000*	$ 142,000	$658,000 ($800,000- $142,000)
2	$ 142,000	$284,000 ( $142,000 + $ 142,000)	$ 516,000 ($800,000 - $ 284,000)
3	$ 142,000	$ 426,000 ( $ 284,000 + $ 142,000)	$374,000 ($800,000 - $426,000)
4	$ 142,000	$ 568,000 ( $ 426,000 + $ 142,000)	$ 232,000 ($800,000 - $568,000)
5	$ 142,000	$710,000 ($568,000+$142,000)	$90,000 ($ 800,000 - $710,000)

** ($800,000 - $ 90,000 ) /  5 = $ 142,000

B. Double - Declining - Balance

Year	Depreciation Expanse	Accumulated Depreciation	Book Value End of Year
1	$ 320,000 ($ 800,000*(1/5) 2 )	$ 320,000	$ 480,000 ( $800,000 - $ 320,000)
2	$ 192,000 ($ 480,000*(1/5) * 2 )	$512,000 ($ 320,000 + $ 192,000)	$288,000 ($ 800,000 - $ 512,000)
3	$115,200 ($288,000*(1/5) * 2 )	$627,200 ($512,000 + $ 115,200)	$ 172,800 ($800,000 -$627,200)
4	$69120 ( $ 172,800 * (1/5)* 2 )	$696,320 ($627,200 + $ 69,120)	$ 103,680 ($ 800,000 - $ 696,320)
5	$ 13,680 ($800,000 - $ 696,320 - $ 90,000)	$710,000 ($696,320 + $ 13,680)	$ 90,000 ($ 800,000 - $ 710,000)

** Book Value should not be reduced below $ 90,000 the residual value .

2.

Account Title and Explanation	Debit	Credit
Cash	$ 135,000
Accumulated Depreciation Equipment	$ 696,320
Equipment		$ 800,000
Gain on sale of Equipment		$ 31,320

** $135,000 - $ 103,680 = $ 31,320

3.

Account Title and Explanation	Debit	Credit
Cash	$88,750
Accumulated Depreciation Equipment	$ 696,320
Loss on sale of equiment	$14,930
Equipment		$ 800,000

** $103,680 - $ 88,750 = $ 14,930