Question

Q1 : Assume Wireless Link Inc. purchased a new piece of equipment on January 1, 2016, that cost $50，000. The estimated useful life is 8 years and estimated residual value is $2，400. If Wireless Link uses the straight-line method for depreciation, what is the asset's carrying amount at the end of 2017?

Q2 : Assume Wireless Link Inc. purchased a new piece of equipment on January 1.2016, that cost $50,000. The estimated useful life is 8 years , and estimated residual value is $3,000. If wireless link uses the double-diminishing=balance method of depreciation, what is the depreciation expense for the year ended December 31, 2017?

Q3 : On June 1, 2016, Wireless Link Inc. purchased a piece of equipment that cost $55,000. The estimated useful life is 10 years, and estimated residual value is $6,000. Assum that Wireless Link uses the straight-line method of depreciation and sells the equipment for $ 38,900 on June 1, 2020. Based on the result of the equipment, what gain or loss Wireless Link realize?

please write down the specific steps.

Answer 1

Question 1:-

The Depreciation expense under the Straight line method is calculated as follows:-

Depreciation expense = (Cost of the asset - Salvage Value)/Estimated life of the asset

=($50,000 - $2,400)/8 years

=$47,600/8 years

=$5,950 per year.

Carrying value at the end of 2017 = Cost of the asset - Depreciation expense for 2 years (2016 and 2017)

=$50,000 - ($5,950 * 2 years)

=$50,000 - $11,900

Carrying value of the equipment at the end of 2017 = $38,100

Question 2:-

The rate of depreciation for Double diminishing balance method is calculated as follows:-

=(100/Estimated useful life) * 2

=(100/8) * 2

=25%

The depreciation expense is calculated as follows:-

2016 = $50,000 * 25% = $12,500

2017 = ($50,000 - $12,500) * 25% = $37,500 * 25% = $9,375

The Depreciation expense for year ended December 31, 2017 = $9,375

Question 3:-

Depreciation expense per year = ($55,000 - $6,000)/10 years

Depreciation expense per year = $49,000/10 years

Depreciation expense per year = $4,900

Depreciation expense between June 1, 2016 and June 1, 2020 = $4,900 * 4 years = $19,600

Carrying value as n June 1, 2020 = $55,000 - $19,600 = $35,400

Sale value = $38,900

Gain(Loss) on sale = $38,900 - $35,400

Gain on Sale = $3,500