Question

Depreciation by Two Methods; Sale of Fixed Asset New tire retreading equipment, acquired at a cost of $110,000 on September 1 at the beginning of a fiscal year, has an estimated useful life of four years and an estimated residual value of $7,500. 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 fourth year, on September 6, the equipment was sold for $18,000, Required: 1. Determine the annual depreciation expense for each of the estimated four 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 Depreciation Accumulated Depreciation, Book Value, Year Expense End of Year End of Year 1 $ 2 $ 3

Answer 1

Please give positive ratings so I can keep answering. Thanks!

Crispy Fried			Straight Line Table	Cost/Opening Book Value	Depreciation Expense	Accumulated depreciation	Net Book Value
Cost of Equipment	110,000.00	A	Year 0	110,000.00	-	-	110,000.00
Residual Value	7,500.00	B	Year 1	110,000.00	25,625.00	25,625.00	84,375.00
Depreciable Value	102,500.00	C=A-B	Year 2	84,375.00	25,625.00	51,250.00	58,750.00
			Year 3	58,750.00	25,625.00	76,875.00	33,125.00
Straight Line Method			Year 4	33,125.00	25,625.00	102,500.00	7,500.00
Depreciable Value	102,500.00	See C	Total		102,500.00
Life	4.00	D
Annual depreciation	25,625.00	E=C/D
				M	N=M*L
Double Declining Method			Table	Cost/Opening Book Value	Depreciation Expense	Accumulated depreciation	Net Book Value
Cost of Equipment	110,000.00	See A	Year 0	110,000.00	-	-	110,000.00
Life	4.00	See D	Year 1	110,000.00	55,000.00	55,000.00	55,000.00
Annual depreciation	27,500.00	J=A/D	Year 2	55,000.00	27,500.00	82,500.00	27,500.00
Depreciation rate	25.00%	K=J/A	Year 3	27,500.00	13,750.00	96,250.00	13,750.00
Double Depreciation %	50.00%	L=K*2	Year 4	13,750.00	6,875.00	103,125.00	6,875.00
			Total		103,125.00
Answer 2				Answer 3
Book Value on Year 4	6,875.00			Book Value on Year 4	6,875.00
Sale Value	18,000.00			Sale Value	10,500.00
Gain on sale	11,125.00			Gain on sale	3,625.00
Journal Entry				Journal Entry
Account	Debit $	Credit $		Account	Debit $	Credit $
Bank	18,000.00			Bank	10,500.00
Accumulated depreciation	103,125.00			Accumulated depreciation	103,125.00
Equipment		110,000.00		Equipment		110,000.00
Gain on sale		11,125.00		Gain on sale		3,625.00
	121,125.00	121,125.00			113,625.00	113,625.00