Prepare a tabular comparison of the annual depreciation

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Reference no: EM132777287

Question - IKEA Spain decided to acquire a new equipment that should help the Spanish stores to be more efficient in their logistics. The amount paid for this equipment was €54,000 with an expected useful life of 4 years and a €3,000 expected terminal value.

a. Prepare a tabular comparison of the annual depreciation and book value for each year under straight-line and Double Declining Balance depreciation

b. Assume straight-line depreciation is used. 2 years after the purchase, and after using the equipment less than expected, IKEA Spain decided to change the useful life from 4 years to 6 years. Calculate depreciation expense for year 3.

c. Assume IKEA Spain chooses the straight-line method with a useful life of 4 years and a residual value of €3,000. What would be the journal entry if IKEA Spain sells the equipment for €34,000 (cash) after 2 years?

Note: Points b. and c. are independent questions. You can ignore b. for solving c. and you can ignore c. for solving b.

Reference no: EM132777287

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