Problem
Mason Company purchased equipment on August 1, 2013, for $95,000. It is estimated that the equipment will have a $5,000 residual value at the end of its 5-year useful life.
Instructions:
1. Compute the amount of depreciation expense for the year ended December 31, 2013, using the straight-line method of depreciation.
2. Compute the amount of depreciation expense for the year ended December 31, 2014, using the double-declining balance method of depreciation.
3. If the company uses the double-declining balance method of depreciation, what is the book value of the equipment at December 31, 2014?
4. Assume the company uses straight-line depreciation and sells the equipment on December 31, 2017 for $12,000. Prepare the journal entry on December 31, 2017 to record the disposal.