Supplementary Problem
On February 20 year 1, we purchased an asset for $10,000 paid 10% in tax and $1,000 transportation to put the asset into usage. SV= $2,000. Life= 5 years. Accounting period ends on December 31.
1. Calculate depreciation expense for the life of the asset using:
a. straight line method
b. 200% declining balance
c. Sum of years digit
2. On July 1 year 3 the asset was sold for $5,000. Record your entry using straight line Method.
3. On April 1 year 3 the asset was scrapped. Record your entry using sum of year digit.
4. On October 1 year 3 the asset was traded by a new asset having a cost of $20,000, trade in allowance was $ 7,000. Record your entry using double declining balance.
5. Assume on December 31 year 3 and before recording depreciation, the life of the asset is re-estimated to be 8 years instead of 5. Calculate the depreciation for year 3 and 4 using:
a. Straight line method
b. 200% declining balance
c. Sum of years digit