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In June, Bill made several purchases to accommodate his growing business.
June 2Bill purchased a storage location for lawn care equipment, paid $45,000 for a building on 1 acre. The land is appraised at $8,000. The building has an estimated life of 10 years with a $5,000 salvage value. Bill paid $2,000 down and financed the remaining purchase price with a 5% 5 year note.
June 4Bill purchased a trailer to haul lawn care equipment for $2,300; estimated life is 5 years with no salvage value. Bill paid for the purchase in cash.
June 5Bill purchased a gas powered trimmer for $1,200 and a commercial leaf-blower for $1,500. Bill estimates they will each have a two year life and no salvage value. Bill paid for both of these pieces of equipment on account.
These are in addition to the three assets Bill acquired in May:
Date ItemCost Estimated Life Salvage Value
May 2Truck$5,0005 years $500
5Lawn Mower$3002 years $0
5Aerator$5002 years$0
Depreciation was recorded in May for these assets using the straight-line method however Bill is considering other depreciation methods and has asked you to prepare a comparison of the straight-line method with the double declining balance (200% DDB) method before he decides.
Instructions:
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