New lithographic equipment, acquired at a cost of $800,000 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $90,000. 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. In the first week of the fifth year, the equipment was sold for $135,000. a. straight line method b. double declining balance method 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. 3. Journalize the entry to record the sale, assuming that the equipment was sold for $88,750 instead of $135,000. If an amount box does not require an entry, leave it blank.

Required:

				Accumulated
		Depreciation		Depreciation,		Book Value,
Year		Expense		End of Year		End of Year
Original cost						$ 800,000
1		$ 142,000		$ 142,000		658,000
2		142,000				516,000
3		142,000				374,000
4		142,000				232,000
5		142,000				90,000

Double-Declining-Balance Depreciation Schedule
					Accumulated
			Depreciation		Depreciation,		Book Value,
	Year		Expense		End of Year		End of Year
	Original cost						$ 800,000
	1		$ 320,000				480,000
	2
	3
	4
	5
	Calculations:
			Depreciable Balance
	Year			x	Rate	=	Yearly Depreciation
	1
	2
	3
	4
	Since depreciation cannot cause book value to fall below residual value:
			Depreciable Balance		Residual Value
	Year			-		=	Yearly Depreciation
	5				$ 90,000
	Accumulated Depreciation
	Cash				135,000
	Equipment						800,000
	Gain on Sale of Equipment
	Accumulated Depreciation
	Cash				88,750
	Loss on Sale of Equipment
	Equipment						800,000