In Style Arrival (ISA) operates a limousine and car service. On March 31, 2009, ISA purchased a car costing $52,000 with an estimated salvage value of $7,000 at the end of its life of 144,000 miles. ISA expects that the car will be driven the following number of miles each year:
2009................................................... 30,000 miles
2010................................................... 32,000 miles
2011................................................... 36,000 miles
2012................................................... 40,000 miles
2013................................................... 6,000 miles
Required:
(a) Prepare a depreciation schedule for ISA using the following depreciation methods:
(1) Straight-line
(2) Double-declining-balance
(3) Units-of-production.
(b) On October 31, 2011, ISA stopped using the car. Prepare journal entries to record the sale or disposal under each of the following four assumptions. Assume that ISA used the double-declining-balance method of depreciation.
(1) Sold the car for $15,000
(2) Sold the car for $9,479
(3) Sold the car for $9,000
(4) Junked the car because it was totaled by a company employee. No other cars were involved, and ISA carried no collision insurance. Had to pay the junk yard $150 to haul the car away from the accident site.