On May 1, 2011, Waller Company purchased new equipment at a cost of Rs 525,000. The useful life of this equipment was estimated at five years, with a residual value of Rs 25,000.

Instructions

Compute the annual depreciation expense for each year until this equipment becomes fully depreciated under each depreciation method listed below. Because you will record depreciation for only a fraction of a year in 2011, depreciation will extend into 2016 for both methods.

a. Straight-line, with depreciation for fractional years rounded to the nearest whole month.

b. 200 percent declining-balance, with the half-year convention. Limit depreciation in 2016 to an amount that reduces the un-depreciated cost to the estimated residual value.

c. Assume that the equipment is sold at the end of December 2013 for Rs 176,250 cash. Record the necessary gain or loss resulting from the sale under the straight-line method