Question

14. EX.09-18.ALGO (Algorithmic) Disposal of Fixed Asset Equipment acquired on January 6 at a cost of $338.100. has an estimated useful life of 7 years and an estimated residual value of $44,100. a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation? Year Depreciation Expense Year 1 $ Year 2 $ Year 3$ b. What was the book value of the equipment on January 1 of Year 4? C. Assuming that the equipment was sold on January 3 of Year 4 for $201,500, Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank. d. Assuming that the equipment had been sold on January 3 of Year 4 for $216,300 instead of $201,500, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Answer 1

a) Depreciation expense

Year	Depreciation expense
1	(338100-44100/7) = 42000
2	42000
3	42000

b) Book value = 338100-(42000*3) = 212100

c) Journal entry

Cash	201500
Accumulated depreciation-equipment (42000*3)	126000
Loss on sale of equipment	10600
Equipment		338100

d) Journal entry

Cash	216300
Accumulated depreciation-equipment (42000*3)	126000
Gain on sale of equipment		4200
Equipment		338100