Depreciation by Two Methods; Sale of Fixed Asset
New lithographic equipment, acquired at a cost of $800,000 atthe beginning of a fiscal year, has an estimated useful life offive years and an estimated residual value of $90,000. 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$135,000.
Required:
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 DepreciationExpense Accumulated Depreciation,End of Year Book Value, End ofYear 1 $ $ $ 2 $ $ $ 3 $ $ $ 4 $ $ $ 5 $ $ $
b. Double-declining-balance method
Year DepreciationExpense Accumulated Depreciation,End of Year Book Value, End ofYear 1 $ $ $ 2 $ $ $ 3 $ $ $ 4 $ $ $ 5 $ $ $
Depreciation by Two Methods; Sale of Fixed Asset
New lithographic equipment, acquired at a cost of $800,000 atthe beginning of a fiscal year, has an estimated useful life offive years and an estimated residual value of $90,000. 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$135,000.
Required:
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 | DepreciationExpense | Accumulated Depreciation,End of Year | Book Value, End ofYear |
| 1 | $ | $ | $ |
| 2 | $ | $ | $ |
| 3 | $ | $ | $ |
| 4 | $ | $ | $ |
| 5 | $ | $ | $ |
b. Double-declining-balance method
| Year | DepreciationExpense | Accumulated Depreciation,End of Year | Book Value, End ofYear |
| 1 | $ | $ | $ |
| 2 | $ | $ | $ |
| 3 | $ | $ | $ |
| 4 | $ | $ | $ |
| 5 | $ | $ | $ |
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 __________ _______________
Comparing Three Depreciation Methods
Waldum Company purchased packaging equipment on January 5, 2012,for $135,000. The equipment was expected to have a useful life ofthree years, or 18,000 operating hours, and a residual value of$13,500. The equipment was used for 8,600 hours during 2012, 5,300hours in 2013, and 4,100 hours in 2014.
Required:
1. Determine the amount of depreciation expensefor the years ended December 31, 2012, 2013, and 2014, by (a) thestraight-line method, (b) units-of-output method, and (c) thedouble-declining-balance method. Also determine the totaldepreciation expense for the three years by each method.
Note: FOR DECLINING BALANCE ONLY, round the multiplier to fourdecimal places. Then round the answer for each year to the nearestwhole dollar.
| DepreciationExpense | ||||||
|---|---|---|---|---|---|---|
| Year | Straight-LineMethod | Units-of-OutputMethod | Double-Declining-BalanceMethod | |||
| 2012 | $ | $ | $ | |||
| 2013 | $ | $ | $ | |||
| 2014 | $ | $ | $ | |||
| Total | $ | $ | $ | |||
Comparing Three Depreciation Methods
Newbirth Coatings Company purchased waterproofing equipment onJanuary 2, 2011, for $340,000. The equipment was expected to have auseful life of four years, or 8,000 operating hours, and a residualvalue of $28,000. The equipment was used for 3,000 hours during2011, 2,500 hours in 2012, 1,400 hours in 2013, and 1,100 hours in2014.
Required:
1. Determine the amount of depreciation expensefor the years ended December 31, 2011, 2012, 2013, and 2014, by (a)the straight-line method, (b) the units-of-output method, and (c)the double-declining-balance method. Also determine the totaldepreciation expense for the four years by each method.
Note: FOR DECLINING BALANCE ONLY, round the multiplier to fourdecimal places. Then round the answer for each year to the nearestwhole dollar.
| DepreciationExpense | ||||||
| Year | Straight-LineMethod | Units-of-OutputMethod | Double-Declining-BalanceMethod | |||
| 2011 | $ | $ | $ | |||
| 2012 | $ | $ | $ | |||
| 2013 | $ | $ | $ | |||
| 2014 | $ | $ | $ | |||
| Total | $ | $ | $ | |||
2. What method yields the highest depreciationexpense for 2013?
SelectStraight-line methodUnits-of-outputmethodDouble-declining-balance methodAll three depreciationmethodsItem 16
3. What method yields the most depreciationover the four-year life of the equipment?
SelectStraight-line methodUnits-of-outputmethodDouble-declining-balance methodAll three depreciationmethods
