Question

Entries for Sale of Fixed Asset Equipment acquired on January at a cost of $132,850, has an estimated usefu fe of 16 years, has an estimated residual value of $7.900, and is depreciated by the straight-line method. a. What was the book value of the equipment at December 31 the end of the fourth year? 101,445 6. Assuming that the equipment was sold on April 1 of the fifth year for 93,237 1. Journalize the entry to record depreciation for the three months until the sale date. Round your answers to the nerest whole dollar if required. Depreciation Expense-Equipment 1,963 Equipment 2. Journalize the entry to record the sale of the equipment. If an amount box does not require an entry, leavet blank. Do not round intermediate calculations Accumulated Depreciation Equipment Los on sale of quant Equipment

Answer 1

Depreciation per year (as per straight line method) = ( Cost - Estimated residual value ) / Estimated useful life = ( 132860 - 7900 ) / 16	7810
Accumulated depreciation for 4 years = Depreciation per year * 4 = 7810 * 4	31240
a.
Book value of the equipment at December 31 at the end of the fourth year = Initial Cost - Accumulated depreciation for 4 year = 132860 - 31240	101620

b.
1.
Depreciation for 3 months = Depreciation per year * 3/12 = 7810 * 3/12	1953
Journal entry :
Depreciation expense - equipment	1953
Accumulated depreciation - equipment		1953

2.
Accumulated depreciation till the date of sale = Accumulated depreciatio for 4 years + Depreciation expense for 3 months = 31240 + 1953	33193
Journal entry :
Cash	93237
Accumulated depreciation-Equipment	33193
Loss on sale of equipment ( 132860 - 93237 - 33193 )	6430
Equipment		132860