Question
eBook Question Content Area Depreciation by Two Methods; Sale of Fixed Asset New lithographic equipment, acquired at a cost of $843,750 on March 1 of
eBook
Question Content Area
Depreciation by Two Methods; Sale of Fixed Asset
New lithographic equipment, acquired at a cost of $843,750 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 $72,600. 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 $123,600.
Required:
Question Content Area
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 | $fill in the blank 29376e068f90f88_1 | $fill in the blank 29376e068f90f88_2 | $fill in the blank 29376e068f90f88_3 |
| 2 | $fill in the blank 29376e068f90f88_4 | $fill in the blank 29376e068f90f88_5 | $fill in the blank 29376e068f90f88_6 |
| 3 | $fill in the blank 29376e068f90f88_7 | $fill in the blank 29376e068f90f88_8 | $fill in the blank 29376e068f90f88_9 |
| 4 | $fill in the blank 29376e068f90f88_10 | $fill in the blank 29376e068f90f88_11 | $fill in the blank 29376e068f90f88_12 |
| 5 | $fill in the blank 29376e068f90f88_13 | $fill in the blank 29376e068f90f88_14 | $fill in the blank 29376e068f90f88_15 |
b. Double-declining-balance method
| Year | Depreciation Expense | Accumulated Depreciation, End of Year | Book Value, End of Year |
| 1 | $fill in the blank 29376e068f90f88_16 | $fill in the blank 29376e068f90f88_17 | $fill in the blank 29376e068f90f88_18 |
| 2 | $fill in the blank 29376e068f90f88_19 | $fill in the blank 29376e068f90f88_20 | $fill in the blank 29376e068f90f88_21 |
| 3 | $fill in the blank 29376e068f90f88_22 | $fill in the blank 29376e068f90f88_23 | $fill in the blank 29376e068f90f88_24 |
| 4 | $fill in the blank 29376e068f90f88_25 | $fill in the blank 29376e068f90f88_26 | $fill in the blank 29376e068f90f88_27 |
| 5 | $fill in the blank 29376e068f90f88_28 | $fill in the blank 29376e068f90f88_29 | $fill in the blank 29376e068f90f88_30 |
Feedback Area
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.
Question Content Area
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.
| blank | CashDepreciation Expense-EquipmentEquipmentGain on Sale of EquipmentLoss on Sale of EquipmentCash | Cash | Cash |
| Accumulated Depreciation-EquipmentDepreciation Expense-EquipmentEquipmentGain on Sale of EquipmentLoss on Sale of EquipmentDepreciation Expense-Equipment | Depreciation Expense-Equipment | Depreciation Expense-Equipment | |
| Accumulated Depreciation-EquipmentCashDepreciation Expense-EquipmentEquipmentLoss on Sale of EquipmentEquipment | Equipment | Equipment | |
| Accumulated Depreciation-EquipmentBuildingsDepreciation Expense-EquipmentGain on Sale of EquipmentLoss on Sale of EquipmentGain on Sale of Equipment | Gain on Sale of Equipment | Gain on Sale of Equipment |
Feedback Area
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?
Question Content Area
3. Journalize the entry to record the sale in (2) assuming that the equipment was sold for $106,100 instead of $123,600. If an amount box does not require an entry, leave it blank.
| blank | Accounts PayableCashDepreciation Expense-EquipmentEquipmentGain on Sale of EquipmentCash | Cash | Cash |
| Accounts ReceivableAccumulated Depreciation-EquipmentDepreciation Expense-EquipmentEquipmentGain on Sale of EquipmentAccumulated Depreciation-Equipment | Accumulated Depreciation-Equipment | Accumulated Depreciation-Equipment | |
| Accounts PayableDepreciation Expense-EquipmentEquipmentGain on Sale of EquipmentLoss on Sale of EquipmentLoss on Sale of Equipment | Loss on Sale of Equipment | Loss on Sale of Equipment | |
| Accumulated Depreciation-EquipmentCashDepreciation Expense-EquipmentEquipmentGain on Sale of EquipmentEquipment | Equipment | Equipment |
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