storm windows company understated their ending inventory during their first year of operations by $2,000. what is the effect of this error at the end of the year? select all answers which apply.

Explanation:

New lithographic equipment, acquired at a cost of $859,200 on March 1 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $96,660.

on March 4, the equipment was sold for $141,422.

Required: 1. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by (a) the straight-line method and (b) the double-declining-balance method. Round your answers to the nearest whole dollar.

Straight Line Method

Depreciation  = (Cost  - Scrap Value) / Number of years = (859,200 -96,660) / 5 = 152,508 per annum

Opening Balance Depreciation Accumulated Depreciation Net Book Value

859,200                152,508                   152,508                         706,692

706,692                152,508                    305,016                         554,184

554,184                 152,508                    457,524                         401,676

401,676                 152,508                     610,032                         249,168

249,168                 152,508                    762,540                          96,660

Double Declining Balance Method

Depreciation  = (Cost  - Scrap Value) / Number of years = (859,200 -96,660) / 5 = 152,508 per annum. This gives a rate of 20% over the 5 years but at the double declining method it shall double, which is 40%

Opening Balance Depreciation Accumulated Depreciation Net Book Value

859,200                343,680                   343,680                         515,520

515,520                206,208                    549,888                         309,312

309,312                 123,725                     673,613                          185,587

185,587                  74,235                     747,845                           111,352

111,352                     14,692                    762,540                          96,660

2. Journalize the entry to record the sale assuming the manager chose the double-declining-balance method. Refer to the Chart of Accounts for exact wording of account titles.

Journal Entries

Dr. Accumulated Depreciation$747,845

Dr. Cash $141,422

Cr. Equipment $859,200

Cr. Gain on disposal$30,067

Being disposal of lithographic equipment at profit