29 Jun Question New tire retreading equipment, acquired at a cost of $140,000 at the beginning
Question
New tire retreading equipment, acquired at a cost of $140,000 at the beginning
of a fiscal year, has an estimated useful life of four years and an estimated residual value of $10,000. 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 fourth year, the equipment was sold for $23,300.
Instructions
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 (a) the straight-line
method and (b) the double-declining-balance method. The following columnar
headings are suggested for each schedule:
Year Depreciation Expense Accumulated Depreciation, End of Year Book value, End of Year
2. Illustrate the effects on the accounts and financial statements of the sale.
3. Illustrate the effects on the accounts and financial statements of the sale,
assuming a sale price of $15,250 instead of $23,300.
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