Question

Question 7 9.6/24 View Policies Show Attempt History Current Attempt in Progress On January 1, 2016, Sheridan Corporation acquired equipment costing $72,320. It was estimated at that time that the equipment would have a useful life of eight years and no residual value. The company uses the straight-line method of depreciation for its equipment, and its year end is December 31. (a) Your answer is correct. Calculate the equipment's accumulated depreciation and carrying amount at the beginning of 2018. Equipment's accumulated depreciation 18080 $ 54240 Carrying amount $ Attempts: 1 of 3 used

Answer 1

Equipment Accumulated Depreciation Carrying Amount $ $ 18,080 54,240 Accumulated depreciation at the beginning of 2018 = Depreciation per annum * no. of years = $9040*2 = $ 18080 Carrying amount = Total Cost - Accumulated Depreciation = $ 72320- $ 18080 = $ 54240 Depreciation per annum Cost of Equipment Less : Residual value Depreciable cost Useful life of asset $ 72,320 $ - $ 72,320 8 years Depreciation per annum = Depreciable Cost/Useful life of asset = $ 72320 / 8 = $ 9,040

b) Gain from the sale of the equipment $ 6,200 Cost of the equipment sold ($ 72320/4) $ Less : Accumulated Depreciation ( 18080/8*2) $ Bookvalue on Beginning of 2018 $ 18,080 (4,520) 13,560 Sale value of the equipment Less : Book value of the equipment sold Gain on sale of the equipment $ $ 19,760 (13,560) 6,200 Depreciation expense for January 1 2018 to October 31,2018 $ 5,650 Cost of Remaining asset ($72320 *3/4) $ 54,240 Depreciation expense per year = $ 54240 /8 = $ 6,780 Depreciation for 10 months = 6780/12*10= $ 5,650

Total Depreciation for 2 Months $ 1,355 Depreciation for 2 months on the earlier asset 6780/12* 2 = $ 1,130 Depreciation on the asset purchased on November 1,2018 = $1350/12*2 = $ 225 Total Depreciation for 2 Months = $ 1130 + $ 225 = $ 1355 Depreciation per year on the asset purchased on November 1, 2018 = ( $ 10800 - 0)/8 = $ 1350