Gandolfi Construction Co. purchased a used CAT 336DL earth mover at a cost of $325,000 in January

Question:

Gandolfi Construction Co. purchased a used CAT 336DL earth mover at a cost of $325,000 in January 2013. The company’s estimated useful life of this heavy equipment is 10 years, and the estimated is $75,000.

Required:
a. Using straight-line depreciation, calculate the depreciation expense to be recognized for 2013, the first year of the equipment’s life, and calculate the equipment’s net book value at December 31, 2015, after the third year of the equipment’s life.
b. Using declining-balance depreciation at twice the straight-line rate, calculate the depreciation expense for the third year of the equipment’s life.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...