Depreciation by two methods; sale of fixed asset Instructions Starting questions

Question

Depreciation by two methods; sale of fixed asset Instructions Starting questions C Chart of Accounts Journal Instructions New lithographic equipment, acquired at a cost of $772,800 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $86,940. 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, the equipment was sold for $130,585 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. On January 1, journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles. 3. On January 1, journalize the entry to record the sale, assuming that the equipment was sold for $87,105 instead of $130,585. Refer to the Chart of Accounts for exact wording of account titles.

Explanation / Answer

1) Straight line method of depreciation (cost - salvage value)/Estimated useful life (772,800 - 86,940)/5 137172 year Depreciation Accumulated Book value expense dep 1 137,172 137,172 635,628 2 137,172 274344 498,456 3 137,172 411516 361,284 4 137,172 548688 224,112 5 137,172 685860 86,940 Double Declining method 1/5*2 0.4 or 40% year Amount Depreciation Accumulated Book value expense dep 1 772,800 309,120 309,120 463,680 2 463,680 185,472 494,592 278,208 3 278,208 111,283 605,875 166,925 4 166,925 66,770 672,645 100,155 5 100,155 13,215 685,860 86,940 2) Journal Entry Date Accounting titles & Explanations Debit Credit year 5 Cash 130,585 Accumulated depreciation 672,645 Gain on sale 30,430 Equipment 772,800 3) year 5 Cash 87,105 Accumulated depreciation 672,645 loss on sale 13,050 Equipment 772,800

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.