Depreciation by Two Methods; Sale of Asset New tire retreading equipment, acquired at a cost of $160,000 at the beginning of a fiscal year, has an estimated useful life of 4 years and an estimated residual value of $10,000. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the basis of the data presented to the manager, the double-declining-balance method was selected. Instructions: 1a. Determine the annual depreciation expense for each of the estimated 4 years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by the straight-line method. Straight-Line Method Year Cost Amount Depreciation Expense Accumulated Depreciation, End of Year 1 2 3 160,000 37,500 37,500 37,500 37,500 37,500 75,000 112,500 150,000 Book Value, End of Year 122,500 85,000 47,500 10,000 1b. Determine the annual depreciation expense for each of the estimated four years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by the double-declining-balance method. Double-Declining-Balance Method 1 Year Cost Amount 160,000 Depreciation Expense Accumulated Depreciation, End of Year 80,000 80,000 2 40,000 130,000 20,000 140,000 Book Value, End of Year 80.000 40,000 20,000 10,000 10,000 2. Assume the double-declining-balance method was used. In the first week of the fourth year, the equipment was sold for $23,300. Illustrate the effects on the accounts and financial statements of this sale. Assume the double-declining-balance method of depreciation is used. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding entry box blank. Enter account decreases and cash outflows as negative amounts. Balance Sheet Assets Assets Accumulated depredation cquis Stockholders' Equity Retained earnings 23,300 160,000 x 20,000 3,300 Statement of Cash Flows Income Statement more Check My Work Previous Ned 3. Assume the double-declining-balance method was used. Illustrate the effects on the accounts and financial statements of the sale, assuming a sale price of $15,250 instead of $23,300. Also, assume the double-declining-balance method of depreciation is used. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding entry box blank. Enter account decreases and cash outflows as negative amounts. Balance Sheet Assets Cash Assets Equipment Assets Accumulated depreciation - equipment Liabilities No effect Stockholders' Equity Retained earnings 15,250 160,000 X 140,000 -4,750 Income Statement Statement of Cash Flows Operating X