Question

Entries for Sale of Fixed Asset Equipment acquired on January 8 at a cost of $129,270, has an estimated useful life of 14 years, has an estimated residual value of $9,850, 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? Feedback Check My Work Book value is the initial cost of the fixed asset minus the accumulated depreciation. b. Assuming that the equipment was sold on April 1 of the fifth year for 86,887. 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 Accumulated Depreciation Equipment 2. Journalize the entry to record the sale of the equipment. If an amount box does not require an entry, leave it blank. Do not round intermediate calculations. Cash Accumulated Depreciation Equipment Loss on Sale of Equipment Equipment Feedback Check My Work Be sure to record the selling price of the fixed asset. If the company no longer has the fixed asset what account(s) would need to be eliminated? Was there a gain or a loss on the sale?

Answer 1

Answer:

Computation of Depreciation expense per year
		Amount($)
	Cost of equipment purchased on January 8,	1,29,270
Less:	Estimated residual value	9,850
	Depreciable value of equipment	1,19,420
Divide:	Life of asset in years	14 years
	Depreciation expense per year	8,530
a)Computation of Book value of equipment as on December 31,the end of 4th year
	Purchase cost / Book value of equipment as on January 8, 1st year	1,29,270
Less:	Depreciation expense for 1st year	8,530
	Book value of equipment as on December 31,1st year	1,20,740
Less:	Depreciation expense for 2nd year	8,530
	Book value of equipment as on December 31, 2nd year	1,12,210
Less:	Depreciation expense for 3rd year	8,530
	Book value of equipment as on December 31, 3rd year	1,03,680
Less:	Depreciation expense for 4th year	8,530
	Book value of equipment as on December 31, 4th year	95,150

b) Journal entries
Date	Account Title	Debit($)	Credit($)
5th year	Depreciation expense-equipment(8530/12*3)	2,133
April 1.	Depreciation expense-equipment		2,133
	(Being depreciation recorded on equipment for 3 months)
April 1.	Cash	86,887
	Accumulated depreciation ($8,530 x 4.25 years)	36,253
	Loss on sale of equipment (bal. fig)	6,131
	Equipment		1,29,270
	(Being equipment sold and loss recorded)