On January 1, 20X1, Pagoda Pond Construction acquired a small excavator for $85,

Question

On January 1, 20X1, Pagoda Pond Construction acquired a small excavator for $85,000. This device had a 4-year service life to Pagoda, at which time it is expected that the equipment will be sold for a $10,000 salvage value.
Pagoda uses the double-declining balance depreciation method.
(a) Prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year.
(b) Show how the asset and related accumulated depreciation would appear on a balance sheet at December 31, 20X3.
(c) Prepare journal entries to record the asset's acquisition, annual depreciation for each year, and the asset's eventual sale for $10,000.

(a)
Year Annual Expense Accumulated
Depreciation at End of Year Annual
Expense Calculation
X1
X2
X3
X4

(b)
Property, Plant & Equipment (20X3)

Equipment
Less: Accumulated depreciation

(c) GENERAL JOURNAL
Date Accounts Debit Credit
1-Jan

To record purchase of excavator

31-Dec
20X1
To record 20X1 depreciation

31-Dec
20X2
To record 20X2 depreciation

31-Dec
20X3
To record 20X3 depreciation

31-Dec
20X4
To record 20X4 depreciation

31-Dec
20X4

To record disposal of asset

Explanation / Answer

(a)

Book Value Year Start

Depreciation Percent

Book Value Year End

$42,500

$42,500

(b)

(c)

Year Annual depreciation expense Accumulated depreciation Related calculations

Book Value Year Start

Depreciation Percent

Book Value Year End

X1

$42,500

$42,500

$85,000 50.00% $42,500 X2 $21,250 $63,750 $42,500 50.00% $21,250 X3 $10,625 $74,375 $21,250 50.00% $10,625 X4 $625 $75,000 $10,625 5.88% $10,000

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