New tire retreading equipment_Depreciation and sale of equipment

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Description

New tire retreading equipment, acquired at a cost
of $140,000 at the beginningof
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
methodwas 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 thebook value of the equipment at
the end of each year by

(a) the straight-linemethod and

(b) the double-declining-balance method.

The following columnarheadings 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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