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New tire retreading equipment, acquired at a cost of $140,000 at the beginning

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Question;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 effectof alternative methods on the amount of depreciation expense each year. On thebasis 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.Instructions1. Determine the annual depreciation expense for each of the estimated fouryears 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 Year2. 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.

 

Paper#43584 | Written in 18-Jul-2015

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