Question

Equipment acquired on January 8 at a cost of $100.870, has an estimated useful life of 12 years, has an estimated residual value of $9,550, 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? B. Assuming that the equipment was sold on April 1 of the fifth year for 561,657 journalize the entries to record (1) depreciation for the three months until the sale date, and (2) the sale of the equipment Refer to the Chart of Accounts for exact wording of accounties

Answer 1

Solution a:

Annual depreciation on equipment = (Cost - Residual value) / Useful life = ($100,870 - $9,550) / 12 = $7,610

Book value at the end of 4th year = $100,870 - ($7,610*4) = $70,430

Solution b:

Journal Entries
Event	Date	Particulars	Debit	Credit
1	Year 5, April 1	Depreciation expense Dr	$1,902.50
		To Accumulated depreciation - equipment		$1,902.50
		(To record partial year depreciation_
2	Year 5, April 1	Cash Dr	$61,657.00
		Accumulated depreciation - Equipment Dr	$32,342.50
		Loss on sale of equipment Dr	$6,870.50
		To equipment		$100,870.00
		(To record sale of equipment)