New lithographic equipment, acquired at a cost of $131,250 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $11,250.

The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the basis of the data presented to the manager, the double-declining-balance method was selected. In the first week of the fifth year, the equipment was sold for $21,500.

Instructions

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

(a) The straight-line method and

(b) The double declining-balance method. The following columnar headings are suggested for eachschedule:

2. Journalize the entry to record the sale.

3. Journalize the entry to record the sale, assuming that the equipment was sold for $12,500 instead of $21,500.

Transcribed Image Text:

Accumulated Depreciation, Depreciation Expense Book Value, End of Year Year End of Year