Question

1. Depreciation by Two Methods; Sale of Long-term or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.Fixed Asset

   New tire retreading equipment, acquired at a cost of $718,750 on September 1 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated The estimated value of a fixed asset at the end of its useful life.residual value of $61,800. 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, on September 6, the equipment was sold for $105,300.

   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 The cost of a fixed asset minus accumulated depreciation on the asset.book value of the equipment at the end of each year by the following methods:

   a. A method of depreciation that provides for equal periodic depreciation expense over the estimated life of a fixed asset.Straight-line method

   Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
   1	$	$	$
   2	$	$	$
   3	$	$	$
   4	$	$	$
   5	$	$	$

   b. A method of depreciation that provides periodic depreciation expense based on the declining book value of a fixed asset over its estimated life. Double-declining-balance method

   Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
   1	$	$	$
   2	$	$	$
   3	$	$	$
   4	$	$	$
   5	$	$	$

   2. Journalize the entry to record the sale, assuming double-declining-balance method is used. If an amount box does not require an entry, leave it blank.

   	Cash Depreciation Expense-Equipment Equipment Gain on Sale of Equipment Loss on Sale of Equipment
   	Accumulated Depreciation-Equipment Depreciation Expense-Equipment Equipment Gain on Sale of Equipment Loss on Sale of Equipment
   	Accumulated Depreciation-Equipment Cash Depreciation Expense-Equipment Equipment Loss on Sale of Equipment
   	Accumulated Depreciation-Equipment Buildings Depreciation Expense-Equipment Gain on Sale of Equipment Loss on Sale of Equipment

   3. Journalize the entry to record the sale in (2), assuming that the equipment was sold for $90,400 instead of $105,300. If an amount box does not require an entry, leave it blank.

   	Accounts Payable Cash Depreciation Expense-Equipment Equipment Gain on Sale of Equipment
   	Accounts Receivable Accumulated Depreciation-Equipment Depreciation Expense-Equipment Equipment Gain on Sale of Equipment
   	Gain on Sale of Equipment Accounts Payable Depreciation Expense-Equipment Equipment Loss on Sale of Equipment
   	Accumulated Depreciation-Equipment Cash Depreciation Expense-Equipment Equipment Gain on Sale of Equipment

Answer 1

1. a. Straight-line method:

Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
1	$ 131,390	$ 131,390	$ 587,360
2	131,390	262,780	455,970
3	131,390	394,170	324,580
4	131,390	525,560	193,190
5	131,390	656,950	61,800

b. Double declining balance method :

Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
1	$ 287,500	$ 287,500	$ 431,250
2	172,500	460,000	258,750
3	103,500	563,500	155,250
4	62,100	625,600	93,150
5	31,350	656,950	61,800

2.

Date	Account Titles	Debit	Credit
		$	$
Sep 6, Year 5	Cash	105,300
	Accumulated Depreciation: Equipment	625,600
	Gain on Sale of Equipment		12,150
	Equipment		718,750

3.

Date	Account Titles	Debit	Credit
		$	$
Sep 6, Year 5	Cash	90,400
	Accumulated Depreciation: Equipment	625,600
	Loss on Sale of Equipment	2,750
	Equipment		718,750