Calculate depreciation under alternative methods and account for disposal of an asset. (LO 2, 5)

A\&W Root Beer Company bought new brewery equipment on January 1, 2008, for \(\$ 64,000\). The company expects the equipment to have a useful life of 8 years and a salvage value of \(\$ 8,000\). The company's fiscal year ends on December 31 .

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a. Calculate the depreciation expense for the fiscal years 2008 and 2009 using each of the following methods:

1. Straight-line method 2. Double-declining balance method

b. Assume that the company decided to use the double-declining balance method and that the brewery equipment was sold at the end of December 2009, for \(\$ 42,000\). What was the gain or loss on the sale? On which financial statement would the gain or loss appear? What information does this accounting calculation provide for future decisions?