ACCT 3200B Dr. James Review Problem - Depreciation, change in estimates, effects of errors On January 2, 2015, Sandy Inc. purchases equipment for $84,000. The estimated useful life is five years and the estimated salvage (residual value) is $4,000. The equipment is expected to produce $160,000 units of product. A. Calculate depreciation expense for 2016 assuming utilization of the: 1. Straight-line method 2. Sum of the years digits method 3. Double-declining balance method 4. Activity-based method (units-of-production method). Production during 2016: 38,000 units. B: Assume that Sandy Inc. utilized the straight-line depreciation method and after 3 three years estimates that the total useful life of the equipment will be 6 years. Prepare the journal entry to recognize depreciation expense for year 4 (i.e., 2018). C: Assume the accountant recognizes the acquisition of the equipment as an expense. If the error is not discovered, what would be the effect on the 2016 financial statements? Indicate U for understatement, O for overstatement and N if there is no effect on the financial statement category. Also indicate the amount of any over- or understatements. Assets Liabilities Equity Net Income D. Refer to the original information and assume that the Double-declining balance method was used. In good form, show the balance sheet presentation for the equipment at 12/31/16