Question

Problem 7-8A Record the disposal of equipment (L07-6) The following information applies to the questions displayed below. New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest Bakery for $650,000. The ovens originally cost $855,000, had an estimated service life of 10 years, had an estimated residual value of $55,000, and were depreciated using straight-line depreciation. Complete the requirements below for New Morning Bakery. Problem 7-8A Part 1 Required: 1. Calculate the balance in the accumulated depreciation account at the end of the second year. Accumulated depreciation

Answer 1

Answer: $160,000 Cost of the asset = $855,000 Salvage value (or) Residual value = 55,000 Economic Life = 10 years Cost - Residual value Annual depreciation under Straight Line Method (SLM) =- Useful life in years $855,000 - 55,000 -= $80,000 10 years Accumulated depreciation at the end of the second year = $80,000 x 2 years = $160,000