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23 June, 09:11

Equipment 300,000Notes Payable 270,000Cash 30,000Note that both the liability and asset will decline over time. As in yesterday's assignment, assume straight line depreciation, with an estimated salvage value of $50,000. At the end of eight years, the equipment is sold for $40,000. On the date of purchase, 1/1/year1, the company hadAssets (possibly among other assets) : Equipment $300,000Liabilities (possibly among other liabilities) : Note Payable $270,000Prepare a spreadsheet showing what these asset and liability balances will be for years 1 through 8, end of year. You will need to add a line to show accumulated depreciation, as well as "Equipment, net accumulated depreciation". For year 8, show all accounts and balances, even if they are zero.

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  1. 23 June, 12:44
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    Equipment: 300,000 for all years

    Accumulated depreciation

    Year Value at year-end

    1 31250

    2 62500

    3 93750

    4 125000

    5 156250

    6 187500

    7 218750

    8 250000

    Equipment (net)

    Year Value at year-end

    1 268750

    2 237500

    3 206250

    4 175000

    5 143750

    6 112500

    7 81250

    8 50000

    Explanation:

    Equipment: 300,000

    depreciation per year under straight-line method:

    (cost-salvage value) / useful life

    300,000 - 50,000 = 250,000 amount subject to depreciation

    250,000 / 8 = 31,250 depreciation per year

    Equipment will remain constant at 300,000 but accumualted depreciation will increase by this amount each. This makes the net value decrease each year.
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