New tire retreading equipment, acquired at a cost of $937,500 on September 1 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $80,600. 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, on September 6, the equipment was sold for $137,300. Required: 1.  Determine the annual depreciation expense for each of the estimated four 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 the following methods:  First Image

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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New tire retreading equipment, acquired at a cost of $937,500 on September 1 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $80,600. 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, on September 6, the equipment was sold for $137,300.

Required:

1.  Determine the annual depreciation expense for each of the estimated four 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 the following methods:  First Image

2. Journalize the entry to record the sale, assuming double-declining-balance method is used. If an amount box does not require an entry,
leave it blank.
3. Journalize the entry to record the sale in (2), assuming that the equipment was sold for $117,900 instead of $137,300. If an amount box
does not require an entry, leave it blank.
Transcribed Image Text:2. Journalize the entry to record the sale, assuming double-declining-balance method is used. If an amount box does not require an entry, leave it blank. 3. Journalize the entry to record the sale in (2), assuming that the equipment was sold for $117,900 instead of $137,300. If an amount box does not require an entry, leave it blank.
a. Straight-line method
Depreciation
Accumulated Depreciation,
Book Value,
Year
Expense
End of Year
End of Year
1
$
$
2
$
4
$
$
$
$
b. Double-declining-balance method
Depreciation
Accumulated Depreciation,
Book Value,
Year
Expense
End of Year
End of Year
1
2
$
$
2$
$4
4
$
$
2$
%24
%24
%24
24
%24
%24
Transcribed Image Text:a. Straight-line method Depreciation Accumulated Depreciation, Book Value, Year Expense End of Year End of Year 1 $ $ 2 $ 4 $ $ $ $ b. Double-declining-balance method Depreciation Accumulated Depreciation, Book Value, Year Expense End of Year End of Year 1 2 $ $ 2$ $4 4 $ $ 2$ %24 %24 %24 24 %24 %24
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