Use the following information to answer questions 1-5. A pressurized spray paint

Question

Use the following information to answer questions 1-5.

A pressurized spray painter was purchased on April 1 of the fiscal year for $3,900. It has a useful life of 4 years,

and a residual value of $300.

1. Determine depreciation expense for year one using the straight-line method. (Points : 3)

       $300

       $3900

       $600

       $675

2. Determine depreciation expense for year one using the double-declining-balance method. (Points : 3)

       $3900.00

       $1462.50

       $2437.50

       $1500.00

3. Determine depreciation expense for two using the straight-line method. (Points : 3)

       $300

       $3900

       $600

       $900

4. Determine depreciation expense for year two using the double-declining-balance method. (Points : 3)

       $1218.75

       $3900

       $2437.50

       $1500.00

5. If the equipment is sold at the end of year one for $3225, what will be the gain or loss on the sale,

assuming that the company used the straight line method of depreciation. (Points : 3)

       $1000

       $100

       $2225

       $0

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Depreciation Year 1 = (3900 - 300)/4 = 900*9/12 = 675

Part B:

Depreciation % = (3900 - 300)/4 = 900/3600*100 = 25%*2 = 50%

Depreciation Year 1 = 3900*.50*9/12 = 1462.5

Part C:

Depreciation Year 2 = (3900 - 300)/4= 900

Part D:

Depreciation Year 2 = (3900 - 1462.5)*.50 = 1218.75

Part E:

Book Value at the End of Year 1 = 3900 - 675 = 3225

Gain/Loss on Sale = 3225 - 3225 = 0

Thanks.

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