Depreciation by Two Methods; Sale of Fixed Asset New tire retreading equipment,
ID: 2490199 • Letter: D
Question
Depreciation by Two Methods; Sale of Fixed Asset New tire retreading equipment, acquired at a cost of $110,000 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, the equipment was sold for $18,000.1. 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.
Explanation / Answer
(a) Straight line method
Annual depreciation = (110000 - 7500)/4 = $25625
Statement showing Accumulated depreciation
Statement showing book value
(b) Double declining method
Rate of depreciation = 25625/110000 x 100 x 2
= 47%
Annual depreciation
Statement showing accumulated depreciation
Statement showing book value
Year Depreciation expense Accumulated Depreciation 1 25625 25625 2. 25625 51250 3. 25625 76875 4. 25625 102500Related Questions
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