Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Depreciation by Two Methods; Sale of Fixed Asset New lithographic equipment, acquired at a cost of $875,000 on March 1 of Year 1 (beginning of

Depreciation by Two Methods; Sale of Fixed Asset New lithographic equipment, acquired at a cost of $875,000 on March 1 of Year 1 (beginning of the fiscal year), has an estimated useful life of five years and an estimated residual value of $75,300. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On March 4 of Year 5, the equipment was sold for $128,100. Required: 1. Determine the annual depreciation expense for each of the estimated five 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 following methods: a. Straight-line method Year Depreciation Expense Accumulated Depreciation, End of Year Book Value, End of Year 1 $ $ $ 2 $ $ $ 3 $ $ $ 4 $ $ $ 5 $ $ $ b. Double-declining-balance method Year Depreciation Expense Accumulated Depreciation, End of Year Book Value, End of Year 1 $ $ $ 2 $ $ $ 3 $ $ $ 4 $ $ $ 5 $ $ $ Feedback Asset cost minus residual value equals depreciable cost. Sum the yearly depreciation to determine total depreciation. In the first year, the balance in the accumulated depreciation account is zero. Remember not to reduce book value below residual value. 2. Journalize the entry to record the sale assuming that the manager chose the double declining-balance method. If an amount box does not require an entry, leave it blank. Cash Accumulated Depreciation-Equipment Equipment Gain on Sale of Equipment Feedback Determine the book value at the point of sale. Compare the book value amount to the sale price. If the book value is less than the sale price, the asset was sold for a gain. If the book value is more than the sale price, the equipment was sold for a loss. If you no longer own the asset what accounts would need to be eliminated? 3. Journalize the entry to record the sale in (2) assuming that the equipment was sold for $110,000 instead of $128,100. If an amount box does not require an entry, leave it blank. Cash Accumulated Depreciation-Equipment Loss on Sale of Equipment Equipment Feedback Determine the book value at the point of sale. Compare the book value amount to the sale price. If the book value is less than the sale price, the asset was sold for a gain. If the book value is more than the sale price, the equipment was sold for a loss. If you no longer own the asset what accounts would need to be eliminated? Feedback Partially correct

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forest Management Auditing

Authors: Lucio Brotto

1st Edition

0367605872, 978-0367605872

More Books

Students also viewed these Accounting questions

Question

Factors Affecting Conflict

Answered: 1 week ago

Question

Describe the factors that lead to productive conflict

Answered: 1 week ago

Question

Understanding Conflict Conflict Triggers

Answered: 1 week ago