Exact Photo Service purchased a new color printer at the beginning of 2018 for $
ID: 2340310 • Letter: E
Question
Exact Photo Service purchased a new color printer at the beginning of 2018 for $42,800. The printer is expected to have a four-year useful life and a $1,712 salvage value. The expected print production is estimated at 1,500,000 pages. Actual print production for the four years was as follows:
The printer was sold at the end of 2021 for $2,112.
Calculate the amount of gain or loss from the sale of the asset under each of the depreciation methods. (Amounts to be deducted should be indicated with minus sign.)
2018 545,300 2019 479,400 2020 383,200 2021 385,600 Total 1,793,500Explanation / Answer
Depreciation under Double declining balance method = (cost - accumulated depreciation) / useful life * 2
Accumulated depreciation in 2018 = $0
Depreciation expense in 2018 = ($42,800 - 0) / 4 * 2 = $21,400
Accumulated depreciation in 2019 = $21,400
Depreciation expense in 2019 = ($42,800-$21,400) / 4 * 2 = $10,700
Accumulated depreciation in 2020 = $21,400+$10,700 = $32,100
Depreciation expense in 2020 = ($42,800-$32,100) / 4 * 2 = $5,350
Accumulated depreciation in 2021 = $32,100 + $5,350 = $37,450
Depreciation expense in 2021 = ($42,800-$37,450) / 4 * 2 = $2,675
Accumulated depreciation = $21,400 + $10,700 + $5,350 + $2,675 = $40,125
Book value = Cost - Accumulated depreciation
= $42,800 - $40,125
= $2,675
Loss = Book value - Sale price
= $2,675 - $2,112
= $563
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Under the units of production method, Depreciation expense per page = (cost - salvage value) / number of pages
= ($42,800 - $1,712) / 150,000
= 0.027392
Accumulated depreciation = $14,937 + $13,132 + $10,497 + $2,522
= $41,088
Book value = Cost - Accumulated depreciation
= $42,800 - $41,088
= $1,712
Gain = Sale price - Book value
= $2,112 - $1,712
= $400
Double declining balance 2018 $21,400 2019 $10,700 2020 $5,350 2021 $2,675Related Questions
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