Question
4 (1.5 points) IKEA Spain decided to acquire a new equipment that should help the Spanish stores to be more efficient in their logistics. The
4 (1.5 points) IKEA Spain decided to acquire a new equipment that should help the Spanish stores to be more efficient in their logistics. The amount paid for this equipment was 67,500 with an expected useful life of 5 years and a 7,500 expected terminal value. Required: (Solve this exercise on the ANSWER SHEET) a. Prepare a tabular comparison of the annual depreciation and book value for each year under straight-line and Double Declining Balance depreciation (0.5 points) b. Assume straight-line depreciation is used. 3 years after the purchase, and after using the equipment less than expected, IKEA Spain decided to change the useful life from 5 years to 7 years. Calculate depreciation expense for year 4. (0.5 points) c. Assume IKEA Spain chooses the straight-line method with a useful life of 5 years and a residual value of 7,500. What would be the journal entry if IKEA Spain sells the equipment for 38,000 (cash) after 3 years? (0.5 points) Note: Points b. and c. are independent questions. You can ignore b. for solving c. and you can ignore c. for solving b
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