Answer:
Golden Sales
a. Annual Straight-line Depreciation = $31,250
Sample Depreciation Journal Entries:
Journal Entry:
1st year, Dec. 31:
Debit Depreciation Expense $31,250
Credit Accumulated Depreciation $31,250
2nd year, Dec. 31:
Debit Depreciation Expense $31,250
Credit Accumulated Depreciation $31,250
3rd year, Dec. 31:
Debit Depreciation Expense $31,250
Credit Accumulated Depreciation $31,250
4th year, Dec. 31:
Debit Depreciation Expense $31,250
Credit Accumulated Depreciation $31,250
b. Journal Entries (Double-declining-balance method)
1st year, Dec. 31
Debit Depreciation Expense $67,500
Credit Accumulated Depreciation $67,500
2nd year, Dec. 31
Debit Depreciation Expense $33,750
Credit Accumulated Depreciation $33,750
3rd year, Dec. 31
Debit Depreciation Expense $16,875
Credit Accumulated Depreciation $16,875
4th year, Dec. 31
Debit Depreciation Expense $6,875
Credit Accumulated Depreciation $6,875
Explanation:
a) Data and Calculations:
Fixed assets bought on January 1 = $135,000
Estimated service life = 4 years
Estimated residual value = $10,000
Depreciable amount = $125,000 ($135,000 - $10,000)
Annual Straight-line Depreciation = $31,250 ($125,000/4)
b. Double-declining balance method:
Depreciation rate = 100%/4 * 2 = 50%
Year 1 Depreciation = $67,500 ($135,000 * 50%)
Year 2 Depreciation = $33,750 ($67,500 * 50%)
Year 3 Depreciation = $16,875 ($33,750 * 50%)
Year 4 Depreciation = $6,875 ($16,875 - $10,000)
