The accountant for Becker Company wants to develop a balance

The accountant for Becker Company wants to develop a balance sheet as of December 31, 2016. A review of the asset records has revealed the following information:

Required:

a.	Asset A was purchased on July 1, 2014, for $50,000 and has been depreciated on the straight-line basis using an estimated life of six years and a residual value of $5,000.
b.	Asset B was purchased on January 1, 2015, for $82,500. The straight-line method has been used for depreciation purposes. Originally, the estimated life of the asset was projected to be six years with a residual value of $7,500; however, at the beginning of 2016, the accountant learned that the remaining life of the asset was only three years with a residual value of $2,500.
c.	Asset C was purchased on January 1, 2015, for $50,000. The double-declining-balance method has been used for depreciation purposes, with a four-year life and a residual value estimate of $5,000.

Solution

Asset A Purchased on 01st July 2014 Depreciation on straight line method Therefore per year depreciation = (50000-5000)/6 7500 Purchase as on 01st July 2014 50000 Less : Depreciation for 2014 six months(7500/2) -3750 Value of asset A as on 31st Dec 2014 46250 Less : Depreciation for 2015 -7500 Value of asset A as on 31st Dec 2015 38750 Less : Depreciation for 2016 -7500 Value of asset A as on 31st Dec 2016 31250 Asset B Purchased on 01st January 2015 Depreciation on straight line method Therefore per year depreciation = (82500-7500)/6 12500 Purchased on 01st January 2015 82500 Less: Depreciation for 2015 -12500 Value of asset B as on 31st Dec 2015 70000 Revised depreciation (70000-2500)/3 22500 Value of Asset B as on 01st Jan 2016 70000 Less: Depreciation for 2016 -22500 Value of Asset B as on 31st Dec 2016 47500 Asset C Purchased on 01st January 2015 Double declining balance method In this method the depreciation rate is double the straight line method rate (50000-5000)/4 11250 Straight Line depreciation rate = 11250/45000 0.25 Double declining balance Rate 0.25*2 0.5 Purchased on 01st January 2015 50000 Less: Depreciation for 2015 -25000 Value of asset B as on 31st Dec 2015 25000 Less: Depreciation for 2016 -12500 Value of Asset B as on 31st Dec 2016 12500 The acquisition cost would be as follows Asset A 50000 Asset B 82500 Asset C 50000 Total Acquisition cost 182500 Accumulated depreciation Asset A 18750 Asset B 35000 Asset C 37500 Total accumulated depreciation 91250 Book Value Asset A 31250 Asset B 47500 Asset C 12500 The assets would appear as follows Asset A Cost of acquisition 50000 Less: Accumulated depreciation 18750 Book value as on 31st Dec 2016 31250 Asset B Cost of acquisition 82500 Less: Accumulated depreciation 35000 Book value as on 31st Dec 2016 47500 Asset C Cost of acquisition 50000 Less: Accumulated depreciation -37500 Book value as on 31st Dec 2016 12500 If asset B is sold on 2nd Jan 2017 for 34500 Value of Asset B as on 01st Jan 2016 70000 Less: Depreciation for 2016 -22500 Value of Asset B as on 31st Dec 2016 47500 Less: Sale of asset B        -34,500 Profit from sale of asset B    13,000.00 Journal Entry for sale would be Cash 34500 Profit on sale of asset B 13000 To Asset B 47500 The gain would appear on the credit side of the income statement