Question

PE 10-6A ORIGINAL Sale of equipment ASSET SOLD AT END OF YEAR Equipment was acquired at the beginning of the year at a cost of $465,000. The equipment was depreciated using the straight-line method based on an estimated useful life of 15 years and an estimated residual value of $45,000. a. What was the depreciation for the first year? b. Assuming the equipment was sold at the end of year 8 for $235,000, determine the gain or loss on the sale of the equipment. c. Journalize the entry to record the sale. PE 10-6A VARIATION Sale of equipment ASSET SOLD DURING THE YEAR Equipment was acquired at the beginning of the year at a cost of $465,000. The equipment was depreciated using the straight-line method based on an estimated useful life of 15 years and an estimated residual value of $45,000 a. What was the depreciation for the first yeari? b. Assuming the equipment was sold on February 28 of year 9 for $235,000, determine the gain or loss on the sale of the equipment. c. Journalize the entry to record depreciation expense for the year of sale. d. Journalize the entry to record the sale itself. 8 PE 10-6A VARIATION CHANGE SALES PRICE Sale of equipment ASSET SOLD AT END OF YEAR

Answer 1

ANSWER TO PE 10-6A

a).Depreciation of the asset for 1st year:

Depreciation=( cost - salvage value)÷ no. Of years usage

= $( 465000-45000)÷15

=$ 28000

b) asset sold at the end of year 8:-

Value of asset at the end of eighth year = 465000 - (28000×8)

= 241000

(-) sale value of asset. = 235000

__________

LOSS on the sale of asset. = 6000_____

C). Journal entry on the sale of asset:-

Bank a/c. Dr. 235000

LOSS on sale of asset a/c. Dr. 6000

To asset a/c. 241000

( Being asset sold)

Profit and loss a/c. Dr. 6000

To loss on sale of asset a/c. 6000

( Being loss on asset transferred)