Part 1 New tire re-treading equipment, acquired at a cost of $120,000 on 1/2/06, has an estimated useful life of 5 years and an estimated residual value of $10,000. The manager requested information regarding the alternative methods on the amount of depreciation expense each year. Instructions: Determine the amount of depreciation expense, accumulated depreciation, and book value for the years ended December 31, 2006, 2007, 2008, 2009, 2010 by ⢠the straight line method ⢠the double declining balance method ⢠units of production Assume that it is estimated that the equipment will be used for 10,000 operating hours. (2,500 (06), 3,000 (07), 2,750 (08), 1,500 (09), 250 (2010). (Present and submit all of your work in the Problem 3 Part 1 Tab) Part 2 Assume that the manager decided to use the double declining balance method for the tire re-treading equipment above. Record the following journal entries: 1. On 4/15/2006 the company paid $1,000 for an ordinary repair. 2. On 1/1/07 the company paid $10,000 for a major engine overhaul. 3. On 7/01/2009 the company sold the equipment for $20,000. (Present and submit all of your work in the Problem 3 Part 2 Tab) Submit one set of answers per group for all four problems. Make sure to include each group members name at the top of each spreadsheet.
Part 1 New tire re-treading equipment, acquired at a cost of $120,000 on 1/2/06, has an estimated useful life of 5 years and an estimated residual value of $10,000. The manager requested information regarding the alternative methods on the amount of depreciation expense each year. Instructions: Determine the amount of depreciation expense, accumulated depreciation, and book value for the years ended December 31, 2006, 2007, 2008, 2009, 2010 by ⢠the straight line method ⢠the double declining balance method ⢠units of production Assume that it is estimated that the equipment will be used for 10,000 operating hours. (2,500 (06), 3,000 (07), 2,750 (08), 1,500 (09), 250 (2010). (Present and submit all of your work in the Problem 3 Part 1 Tab) Part 2 Assume that the manager decided to use the double declining balance method for the tire re-treading equipment above. Record the following journal entries: 1. On 4/15/2006 the company paid $1,000 for an ordinary repair. 2. On 1/1/07 the company paid $10,000 for a major engine overhaul. 3. On 7/01/2009 the company sold the equipment for $20,000. (Present and submit all of your work in the Problem 3 Part 2 Tab) Submit one set of answers per group for all four problems. Make sure to include each group members name at the top of each spreadsheet.
Related questions
New lithographic equipment, acquired at a cost of $875,000 atthe beginning of a fiscal year, has an estimated useful life offive years and an estimated residual value of $75,300. The managerrequested information regarding the effect of alternative methodson the amount of depreciation expense each year. On the basis ofthe data presented to the manager, the double-declining-balancemethod was selected.
In the first week of the fifth year, the equipment was sold for$128,100.
1. Determine the annual depreciation expensefor each of the estimated five years of use, the accumulateddepreciation at the end of each year, and the book value of theequipment at the end of each year by the following methods:
a. Straight-line method
Year | Depreciation Expense | Accumulated Depreciation End of Year | Book Value End of Year |
1 ________________ ______________________ _____________________________
2 ________________ ______________________ _____________________________
3 ________________ ______________________ _____________________________
4 ________________ ______________________ _____________________________
5 ________________ ______________________ ____________________________
b. 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, assumingdouble-declining balance method is used. If an amount box does notrequire an entry, leave it blank.
Cash __________ _______________
Accumulated Depreciation __________ _______________
Equipment __________ _______________
Gain On sale of equipment __________ _______________
3. Journalize the entry to record the sale, assuming that theequipment was sold for $110,000 instead of $128,100. If an amountbox does not require an entry, leave it blank.
Cash __________ _______________
Accumulated Depreciation __________ _______________
loss On sale of equipment __________ _______________
Equipment __________ _______________
