Problem
Construct Inc. Is a company dedicated to the sale and rental of construction equipment. Leased construction equipment for $250,000 for 8 years from Cyan Building Inc. Leased equipment: Penta crane has a cost of $1,800,000, useful life of 8 years, salvage value of $20,000, KJ Inc. is 35%.
Construct Inc. has an average annual net income of $850,000 from operations according to its financial statements, GAAP.
Task
i. Calculate depreciation using the Double Declining method.
ii. Calculate depreciation using the straight-line method.
iii. Prepare the journal entries of the first two years of rent.
iv. Prepare the journal entries for the last two years of rental.