On January 1, 2010, Oceans Front Restaurant purchased new meat slicing equipment for $37,500. Oceans Front also

Question:

On January 1, 2010, Ocean’s Front Restaurant purchased new meat slicing equipment for $37,500. Ocean’s Front also paid $1,000 for shipping and $3,500 to train employees to use the new equipment. The equipment is expected to have a useful life of five years and a salvage value of $2,000.

1. Compute the depreciation expense for the years 2010–2012, using the straight-line method. (December 31 is the fiscal year end.)

2. Compute the depreciation expense for the years 2010–2012, using the double-declining balance method. (Round your answers to the nearest dollar.)

3. What is the book value of the equipment at the end of 2010 under each method?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...