Ermier Company purchased a machine at a cost of dollar 60, 000 The machine Is ex

Question

Ermier Company purchased a machine at a cost of dollar 60, 000 The machine Is expected to have a dollar 5,000 value at the end of its 5-year useful life. Instructions Compute annual depreciation for the first and second years using the straight-line method Double-declining-balance method Brown Company purchased equipment in 2008 for 5150.000 and estimated a 510.000 salvage value at the end of the equipments 10-year useful life At December 31. 2014 there was dollar 98,000 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation On March 31. 2015. the equipment was sold for dollar 40, 000. Prepare all necessary journal entries

Explanation / Answer

Problem 8-

1- SLM Method

Depreciation for year 1 = (80000-5000)/5 = $15000

Depreciation for year 2 = $15000

2- Double Decline Method-

SLM Dep. rate = 15000/75000= 20%

Double Decline Dep. rate = 20*2 =40%

Depreciation for Year 1 = Book value* Double Decline rate

= 80000*40% = $32000

Depreciation for year 2 = (80000-32000)*40% = $19200

Problem 9-

Depreciation for year 2014 = (150000-10000)/10 =$14000

Book value on dec, 31 2015 = 150000-112000= $38000

Accumulated Depreciation on dec.31 2015 = 98000+14000= 112000

Journal Entry-

Debit Credit Cash A/c $40,000.00 Accumulated Dep. $112,000.00    Equipment $150,000.00    Profit on sale of Equipment $2,000.00

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