The new lithographic equipment, purchased 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 on the effect of the alternative methods on the amount of depreciation expense each year.

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

	Required:
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.
2.	Journalize the entry to record the sale assuming the manager chose the double-declining-balance method.
3.	Journalize the entry to record the sale in (2) assuming the equipment sold for $88,750 instead of $135,000.

CHART OF ACCOUNTS

Ledger

	ASSETS
110	Money
111	Petty money
112	accounts receivable
114	interest receivable
115	billable documents
116	Merchandise inventory
117	supplies
119	prepaid insurance
120	Tierra
123	Delivery truck
124	Accumulated Depreciation-Delivery Truck
125	Equipment
126	Accumulated Depreciation-Equipment
130	mineral rights
131	cumulative exhaustion
132	Goodwill
133	patents

	PASSIVE
210	Accounts payable
211	Salaries to pay
213	Sales tax payable
214	interest to pay
215	Pay

	EQUITY
310	Common actions
311	Retained earnings
312	dividends
313	Income Summary

	REVENUE
410	Sales
610	The return on an investment
620	Profit on the sale of delivery trucks
621	Equipment Sales Profit

	BILLS
510	cost of goods sold
520	salary expenses
521	advertising expenses
522	Depreciation Expenses - Delivery Truck
523	Shipping costs
524	Repair and Maintenance Expenses
529	selling expenses
531	Rental costs
532	Depreciation Expense-Equipment
533	depletion expense
534	Amortization Expense-Patents
535	insurance costs
536	Supply expenses
539	Miscellaneous expenses
710	Interest expenses
720	Loss on Sale of Delivery Truck
721	Loss on Equipment Sale

1. Determine the annual depreciation expense for each of the five estimated 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 using (a) the straight-line method and ( b) the double declining balance method.

to. straight line method

		Accumulated depreciation,
Year	depreciation expense	End of the year	Book value, end of year
1
2
3
4
5

b. Double Declining Balance Method

		Accumulated depreciation,
Year	depreciation expense	End of the year	Book value, end of year
1
2
3
4
5

3. On March 4, journal the entry to record the sale in (2) assuming the equipment sold for $88,750 instead of $135,000. Refer to the Chart of Accounts for the exact wording of titles of the bills.

PAGE 1

DIARY

ACCOUNTING EQUATION

	DATE	DESCRIPTION	MAIL. REFEREE.	DEBIT	CREDIT	ASSETS	PASSIVE	EQUITY
1
2
3
4

Answer rating: 100% (QA)

ANSWER Solution 1 a Calculation of depreciation as per straight line method Year 1 2 3 4 5 Straightl... View the full answer