Question

QUESTION 4 (10 marks) On April 1. 2015, Thanderbird Co sold a piece of equipment that had cost $35,000 on January 1, 2011. The equipment had a residual value of $5,000, a useful life 10 years, and double-declining- balance depreciation at twice the straight-line rate was used. On December 31, 2014 accumulated depreciation was $20,664. The asset was sold for $14,200. Prepare the journal entry to record depreciation up to the date of disposal of the equipment, and the journal entry to record the disposal of the equipment. Show your calculation for marks Calculation

Answer 1

Answer to Question 10. Cost of Equipment = $35,000 Date of Purchase of Equipment = January 1, 2011 Double Declining Depreciation Rate = 2 * Straight Line Depreciation Rate Straight Line Depreciation Rate = 1 / Useful Life Straight Line Depreciation Rate = 1/10 = 10% Double Declining Depreciation Rate = 2 * 10% = 20% Accumulated Depreciation as on December 31, 2014 = $20,664 Book Value as on December 31, 2014 = $35,000 - $20,664 Book Value as on December 31, 2014 = $14,336 Depreciation Expense for the period of Jan 1, 2015 to Apr 1, 2015 = $14,336 * 20% * 3/12 Depreciation Expense for the period of Jan 1, 2015 to Apr 1, 2015 = $717 Credit Date April 1, 2015 Debit 717 717 General Journal Depreciation Expense Accumulated Depreciation (To record Depreciation expense up to the date of disposal) Cash Accumulated Depreciation ($20,664 + $717) Equipment Gain on Sale of Equipment (To record sale of Equipment) April 1, 2015 14,200 21,381 35,000 581