Problem 6-26 Effect of straight-line versus double-declining-balance depreciation on the recognition of expense and gains or losses LO 6-3, 6-4

One Day Laundry Services purchased a new steam press on January 1, for $35,700. It is expected to have a five-year useful life and a $3,500 salvage value. One Day expects to use the steam press more extensively in the early years of its life.

Required

a.

Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation.

Year 1 2 3 4 5

Salvage value

Useful life

Annuel depreciation

b.

Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation. (Enter all amounts as positive values. Round "SL rate" answers to 2 decimal places. Round your answers to the nearest dollar amount.)

Year 1 2 3 4 5

Cost - Beginning of period - (2 x SL rate) Anuel depreciation

d.	Assume that One Day Laundry Services sold the steam press at the end of the third year for $18,500. Compute the amount of gain or loss using each depreciation method. (Loss amounts should be indicated with a minus sign.) Straight Line Double declining balance