PR 9-4A Depreciation by two methods; sale of fixed asset OBJ. 2,3 New lithograph

Question

PR 9-4A Depreciation by two methods; sale of fixed asset OBJ. 2,3 New lithographic equipment, acquired at a cost of $800,000 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $90,000. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the basis of the data presented to the manager, the double-declining-balance method was selected. In the first week of the fifth year, the equipment was sold for $135,000. Instructions 1. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by (a) the straight-line method and (b) the Continued) ed Assets and Intangible Assets e suggested for each schedule: Depreciation Expense Accumulated Depreciation, End of Year Book Value, End of Year Year 2. Journalize the entry to record the sale. alize the entry to record the sale, assuming that the equipment was sold for $88,750 instead of $135,000.

Explanation / Answer

1a) Depreciation schedule :

Straight line dep = (800000-90000)5 = 142000

b) double decline balance method :

straight line rate = 100/5=20%

Double decline rate = 20*2=40%

2) Entry to record the sale :

3) Equipment sold for 88750

Year Deperciation expenses accumlated depreciation end of year book value 1 142000 142000 658000 2 142000 284000 516000 3 142000 426000 374000 4 142000 568000 232000 5 142000 710000 90000

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