On January 1, 20X1, Pagoda Pond Construction acquired a small excavator for $85,000.

This device had a 4-year

service life to Pagoda, at which time it is expected that the equipment will be sold for a $10,000 salvage value.

Pagoda uses the double-declining balance depreciation method.

(a) Prepare a schedule showing annual depreciation expense, accumulated depreciation, and related
calculations for each year.

(b) Show how the asset and related accumulated depreciation would appear on a balance sheet at December
31, 20X3.

(c) Prepare journal entries to record the asset's acquisition, annual depreciation for each year, and the asset's
eventual sale for $10,000.
(a)

Annual Accumulated Annual

Year Expense Depreciation at End of Year Expense Calculation

X1 $ 42,500 $42,500 $85,000 x .5

X2 $ 21,250 $63,750 ($85000 - $42,5000) x .5
X3 $ 10,625 $74,375 (85000 - $63,750)
X4 $ 625 $75,000 remaining depreciable base

(b)
Property, Plant & Equipment (20X3)

Equipment $85,000
Less: Accumulated depreciation (74,375) $ 10,625

(c) GENERAL JOURNAL

Date Accounts Debit Credit
1-Jan Equipment 85,000
Cash

To record purchase of excavator

31-Dec Depreciation Expense 42,500

20X1 Accumulated Depreciation 42,500

To record 20X1 depreciation

31-Dec Depreciation Expense 21,250

20X2 Accumulated Depreciation 21,250

To record 20X2 depreciation

31-Dec Depreciation Expense 10,625

20X3 Accumulated Depreciation 10,625

To record 20X3 depreciation

31-Dec Depreciation Expense 625

20X4 Accumulated Depreciation 625

To record 20X4 depreciation

31-Dec Cash 10,000

20X4 Depreciation Expense 75,000
Equipment 85,000

To record disposal of asset