Question
Depreciation by two methods; sale of fixed asset New tire retreading equipment, acquired at a cost of $812,500 on September 1 at the beginning of
Depreciation by two methods; sale of fixed asset
New tire retreading equipment, acquired at a cost of $812,500 on September 1 at the beginning of a fiscal year, has an estimated useful life of 5 years and an estimated residual value of $69,900. 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.
In the first week of the fifth year, on September 6, the equipment was sold for $119,000.
Required:
1. Determine the annual depreciation expense for each of the estimated 5 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 | $ | $ | $ |
2. Journalize the entry to record the sale, assuming double-declining-balance method is used. If an amount box does not require an entry, leave it blank.
| Account | Debit | Credit | |
|---|---|---|---|
| CashDepreciation Expense-EquipmentEquipmentGain on Sale of EquipmentLoss on Sale of Equipment | |||
| Accumulated Depreciation-EquipmentDepreciation Expense-EquipmentEquipmentGain on Sale of EquipmentLoss on Sale of Equipment | |||
| Accumulated Depreciation-EquipmentCashDepreciation Expense-EquipmentEquipmentLoss on Sale of Equipment | |||
| Accumulated Depreciation-EquipmentBuildingsDepreciation Expense-EquipmentGain on Sale of EquipmentLoss on Sale of Equipment |
3. Journalize the entry to record the sale, assuming that the equipment was sold for $102,100 instead of $119,000. If an amount box does not require an entry, leave it blank.
| Account | Debit | Credit | |
|---|---|---|---|
| Accounts PayableCashDepreciation Expense-EquipmentEquipmentGain on Sale of Equipment | |||
| Accounts ReceivableAccumulated Depreciation-EquipmentDepreciation Expense-EquipmentEquipmentGain on Sale of Equipment | |||
| Gain on Sale of EquipmentAccounts PayableDepreciation Expense-EquipmentEquipmentLoss on Sale of Equipment | |||
| Accumulated Depreciation-EquipmentCashDepreciation Expense-EquipmentEquipmentGain on Sale of Equipment |
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