2 problems i need some help with please! 1. Calculate the depreciation expense i

Question

2 problems i need some help with please!

1. Calculate the depreciation expense in the third year of the life of an asset having a $70,000 original cost, 10 percent estimated salvage value, and an eight-year estimated life, assuming each of the following depreciation methods:

(a) Straight line
(b) Double-Declining balance
(c) Declining balance at a 150 percent rate (rather than a double rate)


2. A fixed asset that the Shores Corporation has owned for five years is sold for $14,000 cash.

(a) If the current book value of the asset is $12,000, show in T-account format how this sale should be accounted for.
(b) Assume this asset was being depreciated on a straight-line basis over 10 years and has a $1,000 salvage value. What did Shores originally pay for this asset (including installation costs)?

Explanation / Answer

1. Calculate the depreciation expense in the third year of the life of an asset having a $70,000 original cost, 10 percent estimated salvage value, and an eight-year estimated life, assuming each of the following depreciation methods: (a) Straight line $7875 (b) Double-Declining balance $9843.75 (c) Declining balance at a 150 percent rate (rather than a double rate) $8665 2. A fixed asset that the Shores Corporation has owned for five years is sold for $14,000 cash. (a) If the current book value of the asset is $12,000, show in T-account format how this sale should be accounted for. Cash $14,000 Asset $12,000 Gain on sale of asset $2,000 Asset Balance 12,000 Cash 14,000 Gain on sale of asset 2000 (b) Assume this asset was being depreciated on a straight-line basis over 10 years and has a $1,000 salvage value. What did Shores originally pay for this asset (including installation costs)? Book value $12,000 Less: Salvage value $1,000 Depreciable value $11,000 Since the life is 10 years The purchase price should be ($,11,000 x 10 + 1,000) = $111,000

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