Reference no: EM132709510

Problem - Depreciation by two methods; sale of fixed asset - 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.

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 sales price of $15,250 instead of $23,300.