Q1. Compute the gain (loss) for Fancy Florist on the sale of a van with a:
a. book value of $8,000 and a selling price of $10,000. (_______ / Loss) of _______
b. book value of $10,000 and a selling price of $10,000. (Gain / Loss) of _______
c. book value of $11,000 and a selling price of $10,000. (Gain / _______) of _______
Q2. Equipment purchased for $30,000 with a 10-year estimated useful life and no estimated residual value is sold at the end of Year 2 for $22,000.
a. Compute the book value at the time of sale (at the end of Year 2).
SL ______ DDB _______
b. 1. At the end of Year 2, the market value of the equipment is _______.
2. The market value and the book value are (the same / _______) for SL.
3. The market value and the book value are (the same / _______) for DDB.
4. Why?
Q3. Compute the gain (loss) on the sale for the SL and DDB depreciation methods.

Q4a. Compute the effect on net income for SL and DDB from purchase to sale of the asset. Record in the chart below.

b. Over the life of this asset, the effect on net income is the (same / different) for SL and DDB. Why?

Transcribed Image Text:

Straight-line Double-declining-balance S 22,000 Selling Price S 22,000 Book Value = Gain (Loss) on the Sale Straight-line Double-declining-balance Year 1 Depreciation Expense Year 2 Depreciation Expense Gain (Loss) on the Sale Increase (Decrease) in Net Income