On January 2, 2015 Lev Company purchases equipment for use in fabrication of a part for one of its key products. The equipment costs $95,000, and its estimated useful life is 5 years, after which it is expected to be sold for $10,000.

Required:

1. Compute depreciation expense for each year of the equipments useful life for each of the following depreciation methods:

1. Straight-line (SL)
2. Double-declining-balance (DDB)

2. Assume that Lev Company uses the straight-line method. Prepare journal entries to record the initial purchase of the equipment on January 2, 2015 and the year-end depreciation adjustment on December 31^st. Post the journal entries to T-accounts.
3. Show how the equipment is reported on Levs balance sheet at the end of the third year assuming straight-line depreciation.
4. Lev decides to sell the equipment on January 2^nd of 2018 for $40,000. Prepare the journal entries to record the sale of the asset assuming that Lev uses SL depreciation, and then prepare the entry for the sale assuming that Lev uses DDB.