Golden Sales has bought $135,000 in fixed assets on January 1st associated with

Question

Golden Sales has bought $135,000 in fixed assets on January 1st associated with sales equipment. The residual value of these assets is estimated at $10,000 after they service their 4 year service life. Golden Sales managers want to evaluate the options of depreciation.

a. Compute the annual straight-line depreciation.

Provide the sample depreciation journal entry to be posted at the end of each of the years.

b. Prepare the journal entries for each year of the service life for these assets using the double-declining balance method.

1st year, Dec. 31

2nd year, Dec. 31

3rd year, Dec. 31

4th year, Dec. 31

Explanation / Answer

a. Annual Straight-line depreciation = ($135000-$10000)/4=$31,250

Smaple depreciation journal entry at the end of each of the years

2. Depreciation rate using the double-declining balance method = (100%/4)*2=50%

Double Declining Balance Depreciation Method

Debit Credit Depreciation A/C $31,250 Sales Equipment/Fixed Asset $31,250 (Depreciation booked)

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