Reference no: EM132472599

Point a) Sandhill Pants Company acquires a delivery truck on April 6, 2017, at a cost of $42,320. The truck is expected to have a residual value of $4,670 at the end of its 4-year useful life. Assume that the company has a policy of recording a half-year's depreciation in the year of acquisition and a half-year's depreciation in the year of disposal.

Question 1: Using the double diminishing-balance method, calculate the depreciation expense for each year of the equipment's life. (Round depreciation rate to 2 decimal places for all calculations, e.g. 33.33% and round answers to 0 decimal places, e.g. 5,276.)

Depreciation - 2017$

Depreciation - 2018$

Depreciation - 2019$

Depreciation - 2020$

Point b) Sheridan Pants Company acquires a delivery truck on April 6, 2017, at a cost of $43,260. The truck is expected to have a residual value of $5,110 at the end of its 4-year life. Sheridan uses the nearest month method to pro-rate depreciation expense.

Question 2: Calculate annual depreciation expense for the first and second years using straight-line depreciation, assuming Sheridan has a calendar year end. (Round answers to 0 decimal places, e.g. 5,250.)

Depreciation - 2017$

Depreciation - 2018$

Point c) Pharoah Company sells equipment on March 31, 2017, for $34,920 cash. The equipment was purchased on January 5, 2014, at a cost of $84,000, and had an estimated useful life of five years and a residual value of $3,300. Pharoah Company uses straight-line depreciation for equipment. Adjusting journal entries are made annually at the company's year end, December 31.

Question i) Prepare the journal entry to update depreciation to March 31, 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Question ii) Prepare the journal entry to record the sale of the equipment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)