Depreciation by Two Methods; Sale of Fixed Asset New lithographic equipment, acquired at a cost of $906,250 on March 1 of Year 1 (beginning of the fiscal year), has an estimated useful life of five years and an estimated residual value of $77,900. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On March 4 of Year 5, the equipment was sold for $132,700. Required: 1. Determine the annual depreciation expense for each of the estimated five 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 the following methods: a. Straight-line method Depreciation Accumulated Depreciation, Book Value, Year Expense End of Year End of Year 3. b. Double-declining-balance method Depreciation Accumulated Depreciation, Book Value, Year Expense End of Year End of Year Depreciation Accumulated Depreciation, Book Value, End of Year End of Year Year Expense 1. 2. Journalize the entry to record the sale ajsuming that the manager chose the double declining-balance method. If an amount box does not require an entry, leave it blank. 3. Journalize the entry to record the sale in (2) assuming that the equipment was sold for $113,900 instead of $132,700. If an amount box does not require an entry, leave it blank.
Depreciation by Two Methods; Sale of Fixed Asset New lithographic equipment, acquired at a cost of $906,250 on March 1 of Year 1 (beginning of the fiscal year), has an estimated useful life of five years and an estimated residual value of $77,900. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On March 4 of Year 5, the equipment was sold for $132,700. Required: 1. Determine the annual depreciation expense for each of the estimated five 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 the following methods: a. Straight-line method Depreciation Accumulated Depreciation, Book Value, Year Expense End of Year End of Year 3. b. Double-declining-balance method Depreciation Accumulated Depreciation, Book Value, Year Expense End of Year End of Year Depreciation Accumulated Depreciation, Book Value, End of Year End of Year Year Expense 1. 2. Journalize the entry to record the sale ajsuming that the manager chose the double declining-balance method. If an amount box does not require an entry, leave it blank. 3. Journalize the entry to record the sale in (2) assuming that the equipment was sold for $113,900 instead of $132,700. If an amount box does not require an entry, leave it blank.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Depreciation by Two Methods; Sale of Fixed Asset
New lithographic equipment, acquired at a cost of $906,250 on March 1 of Year 1 (beginning of the fiscal year), has an estimated useful life of five years and an estimated
residual value of $77,900. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year.
On March 4 of Year 5, the equipment was sold for $132,700.
Required:
1. Determine the annual depreciation expense for each of the estimated five 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 the following methods:
a. Straight-line method
Depreciation
Accumulated Depreciation,
Book Value,
Year
Expense
End of Year
End of Year
3.
b. Double-declining-balance method
Depreciation
Accumulated Depreciation,
Book Value,
Year
Expense
End of Year
End of Year
Transcribed Image Text:Depreciation
Accumulated Depreciation,
Book Value,
End of Year
End of Year
Year
Expense
1.
2. Journalize the entry to record the sale ajsuming that the manager chose the double declining-balance method. If an amount box does not require an entry, leave it
blank.
3. Journalize the entry to record the sale in (2) assuming that the equipment was sold for $113,900 instead of $132,700. If an amount box does not require an entry,
leave it blank.
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