New lithographic equipment, acquired at a cost of $800,000 on March 1 at the beginning of a fiscal year, has an estimated useful life of 5 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.

In the first week of the fifth year, on March 4, the equipment was sold for $134,570.

	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 (a) the straight-line method and (b) the double-declining-balance method.
2.	Journalize the entry to record the sale, assuming the manager chose the double-declining-balance method.
3.	Journalize the entry to record the sale in (2), assuming that the equipment was sold for $88,180 instead of $134,570.

CHART OF ACCOUNTSGeneral Ledger

	ASSETS
110	Cash
111	Petty Cash
112	Accounts Receivable
114	Interest Receivable
115	Notes Receivable
116	Merchandise Inventory
117	Supplies
119	Prepaid Insurance
120	Land
123	Delivery Truck
124	Accumulated Depreciation-Delivery Truck
125	Equipment
126	Accumulated Depreciation-Equipment
130	Mineral Rights
131	Accumulated Depletion
132	Goodwill
133	Patents

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends

	REVENUE
410	Sales
610	Interest Revenue
620	Gain on Sale of Delivery Truck
621	Gain on Sale of Equipment

	EXPENSES
510	Cost of Merchandise Sold
520	Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Delivery Truck
523	Delivery Expense
524	Repairs and Maintenance Expense
529	Selling Expenses
531	Rent Expense
532	Depreciation Expense-Equipment
533	Depletion Expense
534	Amortization Expense-Patents
535	Insurance Expense
536	Supplies Expense
539	Miscellaneous Expense
710	Interest Expense
720	Loss on Sale of Delivery Truck
721	Loss on Sale of Equipment

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 (a) the straight-line method and (b) the double-declining-balance method.

a. Straight-line method

Additional Instruction

Accumulated Depreciation,

Year

Depreciation Expense

End of Year

Book Value, End of Year

1

2

3

4

5

b. Double-declining-balance method

	Accumulated Depreciation,
Year	Depreciation Expense	End of Year	Book Value, End of Year
1
2
3
4
5

2. On March 4, journalize the entry to record the sale, assuming the manager chose the double-declining-balance method.

General Journal Instructions

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

3. On March 4, journalize the entry to record the sale in (2), assuming that the equipment was sold for $88,180 instead of $134,570.

General Journal Instructions

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4