Straight-line Depreciation : Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below: Depreciation = Cost of the asset − Residual value Estimated useful life of the asset Double-declining-balance method: It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation ) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation: Depreciation = Purchase Price × ( 2 Useful life ) the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by the straight-line method.

Question

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Answer 1

Question

Chapter 10, Problem 10.4APR

1. (a)

To determine

Straight-line Depreciation:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:

Depreciation = Cost of the asset − Residual valueEstimated useful life of the asset

Double-declining-balance method:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Depreciation = Purchase Price × (2Useful life)

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by the straight-line method.

1. (a)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by straight-line method.

Year	Depreciation Expense (1)	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$142,000	$142,000	$658,000
Year 2	$142,000	$284,000	$516,000
Year 3	$142,000	$426,000	$374,000
Year 4	$142,000	$568,000	$232,000
Year 5	$142,000	$710,000	$90,000

Table (1)

Working notes:

Cost of the equipment= $800,000

Estimated residual value =$90,000

Estimated Useful Life =5 years

Depreciation = (Cost − Residual valueEstimated useful life)= ($800,000 − $90,0005 years)= $710,0005= $142,000

Notes (1):

Accumulated Depreciation for the current year is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

(b)

To determine

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by double-declining-balance method.

(b)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by double-declining-balance method.

Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$320,000 ($800,000 × 25)	$320,000	$420,000
Year 2	$192,000 ($480,000 × 25)	$512,000	$288,000
Year 3	$115,200 ($288,000 × 25)	$627,200	$172,800
Year 4	$69,120 ($172,800 × 25)	$696,320	$103,680
Year 5	$13,680 (2)	$710,000	$90,000

Table (2)

$13,680 ($103,680 − $90,000)

Notes (2):

Accumulated depreciation is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

The depreciation expense should not exceed the residual value of $90,000. Thus, it should be adjusted to make the book value of the equipment (cost less accumulated depreciation) equal to its residual value. Thus, the depreciation expense for Year 5 would be $13,680 ($103,680 − $90,000).

2.

To determine

To journalize: the entry to record the sale of equipment for $135,000 under the double-declining-balance method.

2.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		135,000
	Accumulated depreciation-Equipment		696,320
	Equipment			800,000
	Gain on Sale of Equipment			31,320
	(To record the sale of equipment.)

Table (3)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		135,000
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Gain on sale of equipment		31,320

Table (4)

Cash is an asset, and it is increased by $135,000. Therefore, debit cash with $135,000.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Gain on Sale of Equipment is a gain for the company, and it increases the stockholder’s equity by $31,320. Therefore, credit Gain on Sale of Equipment by $31,320.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000.

3.

To determine

To journalize: the entry to record the sale of equipment for $88,750 under the double-declining-balance method.

3.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		88,750
	Accumulated depreciation-Equipment		696,320
	Loss on Sale of Equipment		14,930
	Equipment			800,000
	(To record the sale of equipment.)

Table (5)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		88,750
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Loss on sale of equipment		(14,930)

Table (6)

Cash is an asset, and it is increased by $88,750. Therefore, debit cash with $88,750.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Loss on Sale of Equipment is a loss for the company, and it decreases the stockholder’s equity by $14,930. Therefore, debit Loss on Sale of Equipment by $14,930.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000

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Problem No. 2 The trial balance of Cleint Lumanao Nacho Supplies on February 10, 2025, before accepting Shila Tajonera as partner is shown as follows: Account Title Debit Credit Ato Cash reening smuo P 100,000 Accounts Receivable 250,000 Allowance for Uncollectible Accounts P 20,000 o Merchandise Inventory Equipment Accumulated Depreciation Accounts Payable Notes Payable 120,000 275,000 55,000 50,000 82,000 538,000 Lumanao, Capital Total P 745,000 P 745,000 Tajonera offered to invest cash to get a capital credit equal to one-half of Lumanao's capital after giving effect to the adjustments below. Lumanao accepted the offer. Valuation of some of the assets and liabilities of Lumanao, as agreed by the partners, are the following: • The merchandise is to be valued at P93,000. The accounts receivable is estimated to be 90% collectible. • The equipment is to be valued at P200,000. The partners also agreed that the name of the partnership will be Nacho Business. Required: 1. In the books of…

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Answer 2

Question

Chapter 10, Problem 10.4APR

1. (a)

To determine

Straight-line Depreciation:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:

Depreciation = Cost of the asset − Residual valueEstimated useful life of the asset

Double-declining-balance method:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Depreciation = Purchase Price × (2Useful life)

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by the straight-line method.

1. (a)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by straight-line method.

Year	Depreciation Expense (1)	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$142,000	$142,000	$658,000
Year 2	$142,000	$284,000	$516,000
Year 3	$142,000	$426,000	$374,000
Year 4	$142,000	$568,000	$232,000
Year 5	$142,000	$710,000	$90,000

Table (1)

Working notes:

Cost of the equipment= $800,000

Estimated residual value =$90,000

Estimated Useful Life =5 years

Depreciation = (Cost − Residual valueEstimated useful life)= ($800,000 − $90,0005 years)= $710,0005= $142,000

Notes (1):

Accumulated Depreciation for the current year is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

(b)

To determine

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by double-declining-balance method.

(b)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by double-declining-balance method.

Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$320,000 ($800,000 × 25)	$320,000	$420,000
Year 2	$192,000 ($480,000 × 25)	$512,000	$288,000
Year 3	$115,200 ($288,000 × 25)	$627,200	$172,800
Year 4	$69,120 ($172,800 × 25)	$696,320	$103,680
Year 5	$13,680 (2)	$710,000	$90,000

Table (2)

$13,680 ($103,680 − $90,000)

Notes (2):

Accumulated depreciation is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

The depreciation expense should not exceed the residual value of $90,000. Thus, it should be adjusted to make the book value of the equipment (cost less accumulated depreciation) equal to its residual value. Thus, the depreciation expense for Year 5 would be $13,680 ($103,680 − $90,000).

2.

To determine

To journalize: the entry to record the sale of equipment for $135,000 under the double-declining-balance method.

2.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		135,000
	Accumulated depreciation-Equipment		696,320
	Equipment			800,000
	Gain on Sale of Equipment			31,320
	(To record the sale of equipment.)

Table (3)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		135,000
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Gain on sale of equipment		31,320

Table (4)

Cash is an asset, and it is increased by $135,000. Therefore, debit cash with $135,000.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Gain on Sale of Equipment is a gain for the company, and it increases the stockholder’s equity by $31,320. Therefore, credit Gain on Sale of Equipment by $31,320.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000.

3.

To determine

To journalize: the entry to record the sale of equipment for $88,750 under the double-declining-balance method.

3.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		88,750
	Accumulated depreciation-Equipment		696,320
	Loss on Sale of Equipment		14,930
	Equipment			800,000
	(To record the sale of equipment.)

Table (5)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		88,750
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Loss on sale of equipment		(14,930)

Table (6)

Cash is an asset, and it is increased by $88,750. Therefore, debit cash with $88,750.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Loss on Sale of Equipment is a loss for the company, and it decreases the stockholder’s equity by $14,930. Therefore, debit Loss on Sale of Equipment by $14,930.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000

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Answer 3

Question

Chapter 10, Problem 10.4APR

1. (a)

To determine

Straight-line Depreciation:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:

Depreciation = Cost of the asset − Residual valueEstimated useful life of the asset

Double-declining-balance method:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Depreciation = Purchase Price × (2Useful life)

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by the straight-line method.

1. (a)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by straight-line method.

Year	Depreciation Expense (1)	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$142,000	$142,000	$658,000
Year 2	$142,000	$284,000	$516,000
Year 3	$142,000	$426,000	$374,000
Year 4	$142,000	$568,000	$232,000
Year 5	$142,000	$710,000	$90,000

Table (1)

Working notes:

Cost of the equipment= $800,000

Estimated residual value =$90,000

Estimated Useful Life =5 years

Depreciation = (Cost − Residual valueEstimated useful life)= ($800,000 − $90,0005 years)= $710,0005= $142,000

Notes (1):

Accumulated Depreciation for the current year is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

(b)

To determine

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by double-declining-balance method.

(b)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by double-declining-balance method.

Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$320,000 ($800,000 × 25)	$320,000	$420,000
Year 2	$192,000 ($480,000 × 25)	$512,000	$288,000
Year 3	$115,200 ($288,000 × 25)	$627,200	$172,800
Year 4	$69,120 ($172,800 × 25)	$696,320	$103,680
Year 5	$13,680 (2)	$710,000	$90,000

Table (2)

$13,680 ($103,680 − $90,000)

Notes (2):

Accumulated depreciation is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

The depreciation expense should not exceed the residual value of $90,000. Thus, it should be adjusted to make the book value of the equipment (cost less accumulated depreciation) equal to its residual value. Thus, the depreciation expense for Year 5 would be $13,680 ($103,680 − $90,000).

2.

To determine

To journalize: the entry to record the sale of equipment for $135,000 under the double-declining-balance method.

2.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		135,000
	Accumulated depreciation-Equipment		696,320
	Equipment			800,000
	Gain on Sale of Equipment			31,320
	(To record the sale of equipment.)

Table (3)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		135,000
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Gain on sale of equipment		31,320

Table (4)

Cash is an asset, and it is increased by $135,000. Therefore, debit cash with $135,000.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Gain on Sale of Equipment is a gain for the company, and it increases the stockholder’s equity by $31,320. Therefore, credit Gain on Sale of Equipment by $31,320.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000.

3.

To determine

To journalize: the entry to record the sale of equipment for $88,750 under the double-declining-balance method.

3.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		88,750
	Accumulated depreciation-Equipment		696,320
	Loss on Sale of Equipment		14,930
	Equipment			800,000
	(To record the sale of equipment.)

Table (5)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		88,750
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Loss on sale of equipment		(14,930)

Table (6)

Cash is an asset, and it is increased by $88,750. Therefore, debit cash with $88,750.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Loss on Sale of Equipment is a loss for the company, and it decreases the stockholder’s equity by $14,930. Therefore, debit Loss on Sale of Equipment by $14,930.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000

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Answer 4

Question

Chapter 10, Problem 10.4APR

1. (a)

To determine

Straight-line Depreciation:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:

Depreciation = Cost of the asset − Residual valueEstimated useful life of the asset

Double-declining-balance method:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Depreciation = Purchase Price × (2Useful life)

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by the straight-line method.

1. (a)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by straight-line method.

Year	Depreciation Expense (1)	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$142,000	$142,000	$658,000
Year 2	$142,000	$284,000	$516,000
Year 3	$142,000	$426,000	$374,000
Year 4	$142,000	$568,000	$232,000
Year 5	$142,000	$710,000	$90,000

Table (1)

Working notes:

Cost of the equipment= $800,000

Estimated residual value =$90,000

Estimated Useful Life =5 years

Depreciation = (Cost − Residual valueEstimated useful life)= ($800,000 − $90,0005 years)= $710,0005= $142,000

Notes (1):

Accumulated Depreciation for the current year is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

(b)

To determine

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by double-declining-balance method.

(b)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by double-declining-balance method.

Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$320,000 ($800,000 × 25)	$320,000	$420,000
Year 2	$192,000 ($480,000 × 25)	$512,000	$288,000
Year 3	$115,200 ($288,000 × 25)	$627,200	$172,800
Year 4	$69,120 ($172,800 × 25)	$696,320	$103,680
Year 5	$13,680 (2)	$710,000	$90,000

Table (2)

$13,680 ($103,680 − $90,000)

Notes (2):

Accumulated depreciation is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

The depreciation expense should not exceed the residual value of $90,000. Thus, it should be adjusted to make the book value of the equipment (cost less accumulated depreciation) equal to its residual value. Thus, the depreciation expense for Year 5 would be $13,680 ($103,680 − $90,000).

2.

To determine

To journalize: the entry to record the sale of equipment for $135,000 under the double-declining-balance method.

2.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		135,000
	Accumulated depreciation-Equipment		696,320
	Equipment			800,000
	Gain on Sale of Equipment			31,320
	(To record the sale of equipment.)

Table (3)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		135,000
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Gain on sale of equipment		31,320

Table (4)

Cash is an asset, and it is increased by $135,000. Therefore, debit cash with $135,000.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Gain on Sale of Equipment is a gain for the company, and it increases the stockholder’s equity by $31,320. Therefore, credit Gain on Sale of Equipment by $31,320.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000.

3.

To determine

To journalize: the entry to record the sale of equipment for $88,750 under the double-declining-balance method.

3.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		88,750
	Accumulated depreciation-Equipment		696,320
	Loss on Sale of Equipment		14,930
	Equipment			800,000
	(To record the sale of equipment.)

Table (5)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		88,750
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Loss on sale of equipment		(14,930)

Table (6)

Cash is an asset, and it is increased by $88,750. Therefore, debit cash with $88,750.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Loss on Sale of Equipment is a loss for the company, and it decreases the stockholder’s equity by $14,930. Therefore, debit Loss on Sale of Equipment by $14,930.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000

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Answer 5

Chapter 10, Problem 10.4APR

1. (a)

To determine

Straight-line Depreciation:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:

Depreciation = Cost of the asset − Residual valueEstimated useful life of the asset

Double-declining-balance method:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Depreciation = Purchase Price × (2Useful life)

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by the straight-line method.

1. (a)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by straight-line method.

Year	Depreciation Expense (1)	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$142,000	$142,000	$658,000
Year 2	$142,000	$284,000	$516,000
Year 3	$142,000	$426,000	$374,000
Year 4	$142,000	$568,000	$232,000
Year 5	$142,000	$710,000	$90,000

Table (1)

Working notes:

Cost of the equipment= $800,000

Estimated residual value =$90,000

Estimated Useful Life =5 years

Depreciation = (Cost − Residual valueEstimated useful life)= ($800,000 − $90,0005 years)= $710,0005= $142,000

Notes (1):

Accumulated Depreciation for the current year is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

(b)

To determine

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by double-declining-balance method.

(b)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by double-declining-balance method.

Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$320,000 ($800,000 × 25)	$320,000	$420,000
Year 2	$192,000 ($480,000 × 25)	$512,000	$288,000
Year 3	$115,200 ($288,000 × 25)	$627,200	$172,800
Year 4	$69,120 ($172,800 × 25)	$696,320	$103,680
Year 5	$13,680 (2)	$710,000	$90,000

Table (2)

$13,680 ($103,680 − $90,000)

Notes (2):

Accumulated depreciation is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

The depreciation expense should not exceed the residual value of $90,000. Thus, it should be adjusted to make the book value of the equipment (cost less accumulated depreciation) equal to its residual value. Thus, the depreciation expense for Year 5 would be $13,680 ($103,680 − $90,000).

2.

To determine

To journalize: the entry to record the sale of equipment for $135,000 under the double-declining-balance method.

2.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		135,000
	Accumulated depreciation-Equipment		696,320
	Equipment			800,000
	Gain on Sale of Equipment			31,320
	(To record the sale of equipment.)

Table (3)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		135,000
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Gain on sale of equipment		31,320

Table (4)

Cash is an asset, and it is increased by $135,000. Therefore, debit cash with $135,000.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Gain on Sale of Equipment is a gain for the company, and it increases the stockholder’s equity by $31,320. Therefore, credit Gain on Sale of Equipment by $31,320.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000.

3.

To determine

To journalize: the entry to record the sale of equipment for $88,750 under the double-declining-balance method.

3.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		88,750
	Accumulated depreciation-Equipment		696,320
	Loss on Sale of Equipment		14,930
	Equipment			800,000
	(To record the sale of equipment.)

Table (5)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		88,750
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Loss on sale of equipment		(14,930)

Table (6)

Cash is an asset, and it is increased by $88,750. Therefore, debit cash with $88,750.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Loss on Sale of Equipment is a loss for the company, and it decreases the stockholder’s equity by $14,930. Therefore, debit Loss on Sale of Equipment by $14,930.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000

Answer 6

Chapter 10, Problem 10.4APR

1. (a)

To determine

Straight-line Depreciation:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:

Depreciation = Cost of the asset − Residual valueEstimated useful life of the asset

Double-declining-balance method:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Depreciation = Purchase Price × (2Useful life)

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by the straight-line method.

1. (a)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by straight-line method.

Year	Depreciation Expense (1)	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$142,000	$142,000	$658,000
Year 2	$142,000	$284,000	$516,000
Year 3	$142,000	$426,000	$374,000
Year 4	$142,000	$568,000	$232,000
Year 5	$142,000	$710,000	$90,000

Table (1)

Working notes:

Cost of the equipment= $800,000

Estimated residual value =$90,000

Estimated Useful Life =5 years

Depreciation = (Cost − Residual valueEstimated useful life)= ($800,000 − $90,0005 years)= $710,0005= $142,000

Notes (1):

Accumulated Depreciation for the current year is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

Answer 7

Chapter 10, Problem 10.4APR

1. (a)

To determine

Straight-line Depreciation:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:

Depreciation = Cost of the asset − Residual valueEstimated useful life of the asset

Double-declining-balance method:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Depreciation = Purchase Price × (2Useful life)

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by the straight-line method.

Answer 8

1. (a)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by straight-line method.

Year	Depreciation Expense (1)	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$142,000	$142,000	$658,000
Year 2	$142,000	$284,000	$516,000
Year 3	$142,000	$426,000	$374,000
Year 4	$142,000	$568,000	$232,000
Year 5	$142,000	$710,000	$90,000

Table (1)

Working notes:

Cost of the equipment= $800,000

Estimated residual value =$90,000

Estimated Useful Life =5 years

Depreciation = (Cost − Residual valueEstimated useful life)= ($800,000 − $90,0005 years)= $710,0005= $142,000

Notes (1):

Accumulated Depreciation for the current year is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

Answer 9

1. (a)

Expert Solution

Answer 10

1. (a)

Expert Solution

Answer 11

Expert Solution

Answer 12

(b)

To determine

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by double-declining-balance method.

(b)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by double-declining-balance method.

Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$320,000 ($800,000 × 25)	$320,000	$420,000
Year 2	$192,000 ($480,000 × 25)	$512,000	$288,000
Year 3	$115,200 ($288,000 × 25)	$627,200	$172,800
Year 4	$69,120 ($172,800 × 25)	$696,320	$103,680
Year 5	$13,680 (2)	$710,000	$90,000

Table (2)

$13,680 ($103,680 − $90,000)

Notes (2):

Accumulated depreciation is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

The depreciation expense should not exceed the residual value of $90,000. Thus, it should be adjusted to make the book value of the equipment (cost less accumulated depreciation) equal to its residual value. Thus, the depreciation expense for Year 5 would be $13,680 ($103,680 − $90,000).

Answer 13

(b)

To determine

the annual depreciation expense, accumulated depreciation, and the book value for each of the estimated five years of use by double-declining-balance method.

Answer 14

(b)

Expert Solution

Explanation of Solution

Determine the annual depreciation expense, accumulated depreciation, and the book value by double-declining-balance method.

Year	Depreciation Expense	Accumulated Depreciation, End of Year	Book Value, End of Year
Year 1	$320,000 ($800,000 × 25)	$320,000	$420,000
Year 2	$192,000 ($480,000 × 25)	$512,000	$288,000
Year 3	$115,200 ($288,000 × 25)	$627,200	$172,800
Year 4	$69,120 ($172,800 × 25)	$696,320	$103,680
Year 5	$13,680 (2)	$710,000	$90,000

Table (2)

$13,680 ($103,680 − $90,000)

Notes (2):

Accumulated depreciation is the sum total of the previous years’ depreciation expense.

Book value is the difference between the cost of the asset and the accumulated depreciation.

The depreciation expense should not exceed the residual value of $90,000. Thus, it should be adjusted to make the book value of the equipment (cost less accumulated depreciation) equal to its residual value. Thus, the depreciation expense for Year 5 would be $13,680 ($103,680 − $90,000).

Answer 15

(b)

Expert Solution

Answer 16

(b)

Expert Solution

Answer 17

Expert Solution

Answer 18

2.

To determine

To journalize: the entry to record the sale of equipment for $135,000 under the double-declining-balance method.

2.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		135,000
	Accumulated depreciation-Equipment		696,320
	Equipment			800,000
	Gain on Sale of Equipment			31,320
	(To record the sale of equipment.)

Table (3)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		135,000
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Gain on sale of equipment		31,320

Table (4)

Cash is an asset, and it is increased by $135,000. Therefore, debit cash with $135,000.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Gain on Sale of Equipment is a gain for the company, and it increases the stockholder’s equity by $31,320. Therefore, credit Gain on Sale of Equipment by $31,320.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000.

Answer 19

2.

To determine

To journalize: the entry to record the sale of equipment for $135,000 under the double-declining-balance method.

Answer 20

2.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		135,000
	Accumulated depreciation-Equipment		696,320
	Equipment			800,000
	Gain on Sale of Equipment			31,320
	(To record the sale of equipment.)

Table (3)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		135,000
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Gain on sale of equipment		31,320

Table (4)

Cash is an asset, and it is increased by $135,000. Therefore, debit cash with $135,000.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Gain on Sale of Equipment is a gain for the company, and it increases the stockholder’s equity by $31,320. Therefore, credit Gain on Sale of Equipment by $31,320.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000.

Answer 21

2.

Expert Solution

Answer 22

2.

Expert Solution

Answer 23

Expert Solution

Answer 24

3.

To determine

To journalize: the entry to record the sale of equipment for $88,750 under the double-declining-balance method.

3.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		88,750
	Accumulated depreciation-Equipment		696,320
	Loss on Sale of Equipment		14,930
	Equipment			800,000
	(To record the sale of equipment.)

Table (5)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		88,750
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Loss on sale of equipment		(14,930)

Table (6)

Cash is an asset, and it is increased by $88,750. Therefore, debit cash with $88,750.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Loss on Sale of Equipment is a loss for the company, and it decreases the stockholder’s equity by $14,930. Therefore, debit Loss on Sale of Equipment by $14,930.

Equipment is an asset, and it is decreased by $800,000. Therefore, credit Equipment account by $800,000

Answer 25

3.

To determine

To journalize: the entry to record the sale of equipment for $88,750 under the double-declining-balance method.

Answer 26

3.

Expert Solution

Explanation of Solution

Journalize: the entry to record the sale under the double-declining-balance method.

Date	Account Title and Explanation	Post Ref	Debit ($)	Credit ($)
	Cash		88,750
	Accumulated depreciation-Equipment		696,320
	Loss on Sale of Equipment		14,930
	Equipment			800,000
	(To record the sale of equipment.)

Table (5)

Working note:

Calculate the gain or (loss) on the sale of equipment.

Title: Calculate the gain (loss) on sale of equipment
Details	Amount ($)	Amount ($)
Cash received on sale of equipment		88,750
Less:
Cost of the equipment	800,000
Less: Accumulated Depreciation	(696,320)
Book Value of the equipment		(103,680)
Loss on sale of equipment		(14,930)

Table (6)

Cash is an asset, and it is increased by $88,750. Therefore, debit cash with $88,750.

Accumulated depreciation-Equipment is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $696,320. Therefore, debit Accumulated depreciation – Equipment by $696,320.

Loss on Sale of Equipment is a loss for the company, and it decreases the stockholder’s equity by $14,930. Therefore, debit Loss on Sale of Equipment by $14,930.