Depreciation by different methods, and sale of a fixed asset New machines were purchased by Nunez Co. on January 1 for $300,000. The equipment was expected to have a useful life of four years and an estimated salvage value of $40,000. Required: 1. Determine the annual depreciation expense for each of the four years under A. The Straight-line method Year 1 $65,000 Year 2 $65,000 Year 3 $65,000 Year 4 $65,000 B. The double-declining balance method Beg. BV DDB% Dep. Exp. End. BV Year 1 300,000 50.0% 150,000 150,000 Year 2 150,000 50.0% 75,000 75,000 Year 3 75,000 50.0% 37,500 37,500 Year 4 37,500 50.0% 18,750 18,750 2. Journalize the entry for the first year assuming the straightline method. (Select the account from the dropdown menu) Date Accounts and Explanations Debit Credit Depreciation expense $65,000 $65,000 3. Journalize the sale of the machine if it was sold at the end of the third year for $100,000. (Select the account from the dropdown menu) (Assume the straight-line method of depreciation was used) Date Accounts and Explanations Debit Credit Cash 10,000 217,500 72,500

Depreciation by different methods, and sale of a fixed asset New machines were purchased by Nunez Co. on January 1 for $300,000. The equipment was expected to have a useful life of four years and an estimated salvage value of $40,000. Required: 1. Determine the annual depreciation expense for each of the four years under A. The Straight-line method Year 1 $65,000 Year 2 $65,000 Year 3 $65,000 Year 4 $65,000 B. The double-declining balance method Beg. BV DDB% Dep. Exp. End. BV Year 1 300,000 50.0% 150,000 150,000 Year 2 150,000 50.0% 75,000 75,000 Year 3 75,000 50.0% 37,500 37,500 Year 4 37,500 50.0% 18,750 18,750 2. Journalize the entry for the first year assuming the straightline method. (Select the account from the dropdown menu) Date Accounts and Explanations Debit Credit Depreciation expense $65,000 $65,000 3. Journalize the sale of the machine if it was sold at the end of the third year for $100,000. (Select the account from the dropdown menu) (Assume the straight-line method of depreciation was used) Date Accounts and Explanations Debit Credit Cash 10,000 217,500 72,500

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Description: Depreciation by different methods, and sale of a fixed asset New machines were purchased by Nunez Co. on January 1 for $300,000. The equipment was expected to have a useful life of four years and an estimated salvage v

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Depreciation by different methods, and sale of a fixed asset

New machines were purchased by Nunez Co. on January 1 for $300,000. The equipment was
expected to have a useful life of four years and an estimated salvage value of $40,000.

Required:
1. Determine the annual depreciation expense for each of the four years under
A. The Straight-line method

Year 1	$65,000
Year 2	$65,000
Year 3	$65,000
Year 4	$65,000

B. The double-declining balance method

	Beg. BV	DDB%	Dep. Exp.	End. BV
Year 1	300,000	50.0%	150,000	150,000
Year 2	150,000	50.0%	75,000	75,000
Year 3	75,000	50.0%	37,500	37,500
Year 4	37,500	50.0%	18,750	18,750


2. Journalize the entry for the first year assuming the straightline method. (Select the account from the dropdown menu)

Date	Accounts and Explanations		Debit	Credit
	Depreciation expense		$65,000
				$65,000



3. Journalize the sale of the machine if it was sold at the end of the third year for $100,000. (Select the account from the dropdown menu)
(Assume the straight-line method of depreciation was used)

Date	Accounts and Explanations		Debit	Credit
	Cash		10,000
			217,500
			72,500
				300,000

Expert Solution

Step 1 Introduction

The depreciation expense is charged on fixed assets as reduced value of the fixed asset with usage and the passage of time. The depreciation expense can be calculated using various methods as straight line method, double declining balance method and units of production method.

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