On January 3, 2011, Hamir Company purchased equipment for $48,000. Hamir planned to keep the equipment for four years, and expected the equipment would then be sold for $4,000. On January 5, 2014, Hamir sold the computer equipment for $8,000.
Instructions
(a) Calculate the depreciation expense for 2011, 2012, and 2013 under
(1) The straight-line method
(2) The double diminishing-balance method.
(b) Calculate the gain or loss on disposal if Hamir had used
(1) The straight-line method
(2) The double diminishing-balance method.
(c) Explain why the gain or loss on disposal is not the same under the two depreciation methods.
(d) Calculate the total depreciation expense plus the loss or minus the gain under
(1) The straight-line method
(2) The double diminishing-balance method. Comment on your findings.