What are some benefits and risk of various depreciation methodson a company's net income?
What are some benefits and risk of various depreciation methodson a company's net income?
Related questions
Depreciation by Two Methods; Sale of Fixed Asset
New lithographic equipment, acquired at a cost of $800,000 atthe beginning of a fiscal year, has an estimated useful life offive years and an estimated residual value of $90,000. The managerrequested information regarding the effect of alternative methodson the amount of depreciation expense each year. On the basis ofthe data presented to the manager, the double-declining-balancemethod was selected.
In the first week of the fifth year, the equipment was sold for$135,000.
Required:
1. Determine the annual depreciation expensefor each of the estimated five years of use, the accumulateddepreciation at the end of each year, and the book value of theequipment at the end of each year by the following methods:
a. Straight-line method
| Year | DepreciationExpense | Accumulated Depreciation,End of Year | Book Value, End ofYear |
| 1 | $ | $ | $ |
| 2 | $ | $ | $ |
| 3 | $ | $ | $ |
| 4 | $ | $ | $ |
| 5 | $ | $ | $ |
b. Double-declining-balance method
| Year | DepreciationExpense | Accumulated Depreciation,End of Year | Book Value, End ofYear |
| 1 | $ | $ | $ |
| 2 | $ | $ | $ |
| 3 | $ | $ | $ |
| 4 | $ | $ | $ |
| 5 | $ | $ | $ |
New lithographic equipment, acquired at a cost of $875,000 atthe beginning of a fiscal year, has an estimated useful life offive years and an estimated residual value of $75,300. The managerrequested information regarding the effect of alternative methodson the amount of depreciation expense each year. On the basis ofthe data presented to the manager, the double-declining-balancemethod was selected.
In the first week of the fifth year, the equipment was sold for$128,100.
1. Determine the annual depreciation expensefor each of the estimated five years of use, the accumulateddepreciation at the end of each year, and the book value of theequipment at the end of each year by the following methods:
a. Straight-line method
Year | Depreciation Expense | Accumulated Depreciation End of Year | Book Value End of Year |
1 ________________ ______________________ _____________________________
2 ________________ ______________________ _____________________________
3 ________________ ______________________ _____________________________
4 ________________ ______________________ _____________________________
5 ________________ ______________________ ____________________________
b. Double-declining-balance method
Year | Depreciation Expense | Accumulated Depreciation End of Year | Book Value End of Year |
1 ________________ ______________________ _____________________________
2 ________________ ______________________ _____________________________
3 ________________ ______________________ _____________________________
4 ________________ ______________________ _____________________________
5 ________________ ______________________ ____________________________
2. Journalize the entry to record the sale, assumingdouble-declining balance method is used. If an amount box does notrequire an entry, leave it blank.
Cash __________ _______________
Accumulated Depreciation __________ _______________
Equipment __________ _______________
Gain On sale of equipment __________ _______________
3. Journalize the entry to record the sale, assuming that theequipment was sold for $110,000 instead of $128,100. If an amountbox does not require an entry, leave it blank.
Cash __________ _______________
Accumulated Depreciation __________ _______________
loss On sale of equipment __________ _______________
Equipment __________ _______________
