Question

On July 4, 2017, Sydney Inc. purchased new equipment for its print shop. The equipment cost $102,000. Sydney's accountant estimated that the useful life of equipment would be five years and the residual value $12,000. Assume that Sydney took a full year of depreciation for the equipment in the year ended June 30, 2018.

Required:
a. Prepare a depreciation schedule for the new equipment, assuming the use of straight-line depreciation. Set up your depreciation schedule like Figure 8.5 in the chapter.
b. Prepare a depreciation schedule for the new equipment assuming the use of declining-balance depreciation using a depreciation rate of 35 percent. Set up your depreciation schedule like Figure 8.6 in the chapter.
c. Assume that on June 30, 2021, after the depreciation expense had been recorded for the year, Sydney sold the equipment for $45,000. Prepare the journal entry that is required to record the sale assuming that
i. The depreciation schedule in (a) was used.
ii. The depreciation schedule in (b) was used.
d. Explain the reason for the different income statement effects for the journal entries you recorded in (c).



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  • CreatedFebruary 26, 2015
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