Acompany purchases equipment for $62,500 on January 1. It has an estimed residua

Question

Acompany purchases equipment for $62,500 on January 1. It has an estimed residual value of $2,800 and an estimated useful life of 5 years. The company uses the declining balance method of depreciation. Determine the amount of depreciation expense for the FIFTH year 14. A company purchases equipment for $82,500 on January 1. It has an estimed residual value of $5,000 and an estimated useful life of 5 years. The company uses the straight-line method of depreciation. The company sells the equipment on 12/31 after 3 full years of ownership for $40,300 cash. Determine the amount of gain or loss on the sale. (Enter a loss as a negative number.) 15. After the adjusting entry is made to set up the estimate for uncollectible accounts, Accounts Receivable has a debit balance of $516,200, Note Receivable has a debit balance of $32,000, and Allowance for Doubtful Accounts has a credit balance of $20,600. What is the net realizable value of the Accounts Receivable? 16.

Explanation / Answer

Year

Beginning BV

Accumulated depreciation

1

2

50000

3

40

4

40

5

Answer: Fifth year depreciation = $4,320

Note: The above depreciation is for double declining balance method with half year

convention.

Annual depreciation = (82500-5000)/5 =

Depreciation for 3 years = 15500*3 =

Book value at the end of the 3rd year = 82500-46500 =

Sale value

$           40,300

Gain on sale = 40300-36000 =

$              4,300

Net realizable value of Accounts receivable = 516200 - 20600 =

14) Depreciation using Declining balance method: Using a factor of 2 (Double declining balance method), the depreciation rate is (100%)/5 = 20%*2 = 40%. With half year convention the first year rate will be 20%. The depreciation schedule is given below:

Year

Beginning BV

Depreciation % Depreciation Expense

Accumulated depreciation

Ending BV

1

62500 20 12500 12500 50000

2

50000

40 20000 32500 30000

3

30000

40

12000 44500 18000

4

18000

40

7200 51700 10800

5

10800 40 4320 56020 6480

Answer: Fifth year depreciation = $4,320

Note: The above depreciation is for double declining balance method with half year

convention.

15)

Annual depreciation = (82500-5000)/5 =

$           15,500

Depreciation for 3 years = 15500*3 =

$           46,500

Book value at the end of the 3rd year = 82500-46500 =

$           36,000

Sale value

$           40,300

Gain on sale = 40300-36000 =

$              4,300

GAIN 16)

Net realizable value of Accounts receivable = 516200 - 20600 =

$         495,600

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