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Depreciation by Two Methods; Sale of Fixed Asset New lithographic equipment, acquired at a cost of $562,500 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 $48,400. 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 $82,400. Required: 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 the following methods: a. Straight-line method

Answer :

Answer:

Annual depreciation expense =(Cost-Residual value)/Useful live

Cost=$562500

Residual value=$48400

Useful live=5years

As as a result annual depreciation=$102820

The figures for accumulated depreciation for relevant years can be found in the attached excel file.

Explanation:

The book value of the asset after useful years was $48400,its residual value.

The gain on disposal van be computed thus:

Proceeds-Residual value

$82400-$48400=$34000

Step - (1) - Information Given -      

     

Equipment cost = $562500.      

     

Estimated useful life = 5 years.      

     

Estimated residual value = $48400.      

     

.      

     

Step - (2) - Calculation of Annual depreciation expense, Accumulated depreciation and the Book value of the Equipment at the end of each year -      

     

Straight-line depreciation = (Cost of Equipment - Residual value) / Estimated useful life      

     

= ($562500 - $48400) / 5 years      

     

= $102820      

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