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

Bella Interiors purchased a new sewing machine on January 2, 2007, for \(\$ 48,000\). The company expects the machine to have a useful life of 5 years and a salvage value of \(\$ 3,000\). The company's fiscal year ends on December 31.

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a. Calculate the depreciation expense for the fiscal years 2007 and 2008 using each of the following methods:

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

b. Assume that Bella Interiors decided to use the straight-line method and that the sewing machine was sold at the end of December 2009 , for \(\$ 27,000\). 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?