New lithographic equipment, acquired at a cost of $800,000 on March 1 of Year 1 (beginning of the fiscal year), has an estimated useful life of five years and an estimated residual value of $90,000. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year.

On March 4 of Year 5, the equipment was sold for $135,000.

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 each schedule:

2. Journalize the entry to record the sale assuming that the manager chose the double-declining-balance method.

3. Journalize the entry to record the sale in (2) assuming that the equipment was sold for $88,750 instead of $135,000.

Transcribed Image Text:

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