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​Equipment was acquired at the beginning of the year at a cost of $75,000


Equipment was acquired at the beginning of the year at a cost of $75,000. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,740. 


Required:

 a What was the depreciation expense for the first year?

 b. Assuming the equipment was sold at the end of the second year for $50,786, determine the gain or loss on sale of the equipment

 c. Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles

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Answer #1

Answer to Part a.
Straight Line Depreciation per year = (Cost – Residual Value) / useful Life
Straight Line Depreciation per year = ($75,000 - $7,740) / 6
Straight Line Depreciation per year = $11,210

Therefore, Depreciation expenses for the first year is $11,210

Answer to Part b.
Accumulated Depreciation at the end of Year 2 = Annual Depreciation * 2
Accumulated Depreciation at the end of Year 2 = $11,210 * 2
Accumulated Depreciation at the end of Year 2 = $22,420

Book Value on the date of Sale = Cost – Accumulated Depreciation till the date of Sale
Book Value on the date of Sale = $75,000 - $22,420
Book Value on the date of Sale = $52,580

Sale Value = $56,786

Gain/ (Loss) on Sale of Equipment = Sale Value – Book Value on the date of Sale
Gain/ (Loss) on Sale of Equipment = $56,786 - $52,580
Gain on Sale of Equipment = $4,206

Answer to Part c. Credit Date Year 2 End Debit 56,786 22,420 General Journal Cash Accumulated Depreciation Equipment Gain on

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