Accounting 26th Edition by Carl Warren,James Reeve,Jonathan Duchac

Exercise 14

Depreciation by two methods; sale of fixed asset
New lithographic equipment, acquired at a cost of $800,000 on March 1 of Year 1 (beginning of the fiscal year), has an estimated useful life of five years and an estimated residual value of $90,000. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year.
On March 4 of Year 5, the equipment was sold for $135,000.
Instructions
1. Determine the annual depreciation expense for each of the estimated five 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:

2. Journalize the entry to record the sale assuming that the manager chose the doubledeclining- balance method.
3. Journalize the entry to record the sale in (2) assuming that the equipment was sold for $88,750 instead of $135,000.