Question

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New lithographic equipment, acquired at a cost of $905,600 on March 1 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $101,880. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the basis of the data presented to the manager, the double-declining-balance method was selected. In the first week of the fifth year, on March 4, the equipment was sold for $149,286. Required: 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. Round your answers to the nearest whole dollar. 2. Journalize the entry to record the sale assuming the manager chose the double-declining- balance method. Refer to the Chart of Accounts for exact wording of account titles. 3. Journalize the entry to record the sale in (2), assuming that the equipment was sold for $103,386 instead of $149,286. Refer to the Chart of Accounts for exact wording of account titles. CHART OF ACCOUNTS General Ledger ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 114 Interest Receivable 115 Notes Receivable 116 Merchandise Inventory 117 Supplies 119 Prepaid Insurance 120 Land 123 Delivery Truck REVENUE 410 Sales 610 Interest Revenue 620 Gain on Sale of Delivery Truck 621 Gain on Sale of Equipment EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Delivery Truck 523 Delivery Expense

Answer 1

STRAIGHT LINE METHOD DEPRECIATION P.A 885240 17023.84615 DEPRECIATION FOR FIRST WEEK OF FIFTH MONTH 17024 DEPRECIATI ACCUMULATED DEPRECIATION ВОOK VALUE YEAR 1 885240 885240 20360 2 885240 1770480 -864880 -2635360 3 885240 2655720 4 885240 3540960 -5291080 17024 5 3557984 -8849064 DOUBLE DECLINING BALANCE METHOD 0.02 DEPRECIATION RATE 0.021181506 RATE UNDER DOB METHOD 4 DEPRECIATI ACCUMULATED DEPRECIATION YEAR BOOK VALUE 362240 1 362240 543360 2 217344 579584 326016 86937.6 666521.6 239078.4 4 34775.04 701296.64 204303.36 5 768944.96 1470241.6 -564641.6 2)B. CASH A/C DR 149286 ACCUMULA DR 1470241.6 TO EQUIPMENT 905600 TO GAIN ON SALE OF EQUIPMENT 713927.6 3)C CASH A/C DR 103386 ACCUMULA DR 1470241.6 TO GAIN ON 668027.6 TO EQUIPMENT 905600 LO