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In: Accounting

New tire retreading equipment, acquired at a cost of $110,000 at the beginning of a fiscal...

New tire retreading equipment, acquired at a cost of $110,000 at the beginning of a fiscal year, has an estimated useful life of four years and an estimated residual value of $7,500. 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 fourth year, the equipment was sold for $18,000.

Required:
1. Determine the annual depreciation expense for each of the estimated four 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 double declining- balance method.
2. On January 1, journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles.
3. On January 1, journalize the entry to record the sale, assuming that the equipment sold for $10,500 instead of $18,000. Refer to the Chart of Accounts for exact wording of account titles.

Determine the annual depreciation expense for each of the estimated four 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 double declining- balance method.

a. Straight-line method

Accumulated Depreciation,
Year Depreciation Expense End of Year Book Value, End of Year
1
2
3
4

b. Double-declining-balance method

Accumulated Depreciation,
Year Depreciation Expense End of Year Book Value, End of Year
1
2
3
4

2. On January 1, journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

DATE DESCRIPTION POST. REF. DEBIT CREDIT

1

2

3

4

3. On January 1, journalize the entry to record the sale, assuming that the equipment sold for $10,500 instead of $18,000. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

DATE DESCRIPTION POST. REF. DEBIT CREDIT

1

2

3

4

Solutions

Expert Solution

Note: Journal entries are prepared for double-declining balance method, because double-declining balance method is selected by the management.

ekkarill92 answered 1 year ago
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