On June 1, 2020, Nha Trang Company purchases for $2,150,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $80,000.

Instructions

1. (a) Journalize the entries for depreciation expense for Year 2020 and 2021, assuming the company uses Sum-of-the-year depreciation.

2. (b) Repeat part a, assuming the company uses double-declining method.

3. (c) At the beginning of 2022, the company determined that the equipment would still be useful to the company for the next 5 years, and salvage value is estimated at $50,000. Assuming the company uses straight-line method, compute the amount of depreciation expense for 2022.

4. (d) Describe the reasons why companies use Straight-line Depreciation and why companies use Double-Declining Balance Depreciation.