Depreciation and Disposal--A Comprehensive Problem
Domino, Inc Uses Straight-Line Depreciation

question 147

Essay

Depreciation and disposal--a comprehensive problem
Domino, Inc uses straight-line depreciation with a half-year convention in its financial statements. On March 10, 2006, Domino acquired a computer system at a cost of $98,800. Estimated useful life is six years, with residual value of $5,200.
(a) Complete the following schedule, showing depreciation expense Domino expects to recognize each year in the financial statements.
(b) Assume Domino sells the computer system on October 3, 2009, for $26,650.
$$\begin{array} { | l | l | } \hline & \text { Depreciation Recognized } \\\hline \text { Year } & \text { in Financial Statements } \\\hline 2006 & \$\underline{\quad\quad} \\\hline 2007 & \$\underline{\quad\quad} \\\hline 2008 & \$ \underline{\quad\quad}\\\hline 2009 & \$\underline{\quad\quad} \\\hline 2010 & \$\underline{\quad\quad} \\\hline 2011 & \$ \underline{\quad\quad}\\\hline 2012 & \$\underline{\quad\quad} \\\hline & \\ \hline\end{array}$$ $\text { For financial statement purposes, compute the book value of the computer }$
$\text { system at date of disposal and the gain or loss on disposal. (Indicate gain or }$
$\text { loss.) }$
$\begin{array}{|l|l|}\hline \begin{array}{l}\end{array} \\\hline \text { Book value (date of sale) }&\$\underline{\quad\quad\quad} \\\hline \text { Gain or loss on disposal }&\$\underline{\quad\quad\quad}\\\hline \end{array}$

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Definitions:

Comprehensive Income

The change in equity of a business enterprise during a period from transactions and other events from non-owner sources. It includes all forms of earnings and gains or losses.

Accounts Payable Turnover

A financial metric that measures the rate at which a company pays off its suppliers.

Days' Sales

A financial metric that measures the average time it takes for a company to turn its inventory into sales.

Receivables

Money owed to a company by its customers from sales or services rendered, recorded as an asset on the balance sheet.