Calculate depreciation under alternative methods and account for disposal of an asset.( LO 2,5)
The Queen Grande View Hotel purchased a van 3 years ago for $62,000. The company expects the van to have a useful life of 4 years and a $10,000 salvage value. Queen Grande View has taken three full years of depreciation expense.
Required
a. Assume that Queen Grande View uses straight-line depreciation. If the van is sold for $20,000, will there be a gain or loss on the sale? If so, how much? How will it affect Queen Grande View’s financial statements for the year?
b. Assume that Queen Grande View uses double-declining balance depreciation. If the van is sold for $9,750, will there be a gain or loss on the sale? If so, how much? How will it affect Queen Grande View’s financial statements for the year?
c. Assume Queen Grande View uses double-declining balance depreciation and sells the van for $23,000. Would there be a gain or loss on the sale? How would that change if Queen Grande View had been using straight-line depreciation?