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Ruger Manufacturing sells office equipment on September 30, 2013, for $8,250 cash. The office equipment was...

Ruger Manufacturing sells office equipment on September 30, 2013, for $8,250 cash. The office
equipment was purchased on January 5, 2009, at a cost of $72,500, and had an estimated useful life
of five years and an estimated residual value of $2,500. Adjusting journal entries are made annually
at the company’s year-end, December 31 and Ruger uses straight-line depreciation. Prepare journal
entries to:
a) update depreciation to September 30, 2013
b) record the sale of the equipment, and
c) record the sale of the equipment if Ruger Manufacturing received $4,500 cash for it.

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Answer #1

Depreciation under SLM = (Cost less Residual Value) / Useful Life

Ruger Manufacturin Journal entries Date Account Debit Credit Calculation 30-Sep-13 Depreciation expense 10,500 14,000/12*9 Accumulated Depreciation-Office Equipment (To record depreciation upto date of sale) 10,500 30-Sep-13 Cash 8,250 66,500 Accumulated Depreciation-Office Equipment Gain on sale of asset Office Equipment To record sale of office equipment) Accumulated Dep on Sep 2013 as per table 2,250 72,500 30-Sep-13 Cash 4,500 66,500 1,500 Accumulated Depreciation-Office Equipment Loss on sale of asset Office Equipment To record sale of office equipment) Accumulated Dep on Sep 2013 as per table 72,500

Ruger Manufacturin Straight line depreciation method Annual depreciation (Cost-Residual Value)/Useful Life (72,500-2,500)/5 14,000 Calculation Years of Useful life Annual Depreciation 14,000 14,000 14,000 14,000 10,500 Cost Accumulated Depreciation Book Value Accumulated Depreciation Book Value 72,500 72,500 72,500 72,500 72,500 14,000 28,000 42,000 56,000 66,500 58,500 Cumulative Dep expense 44,500 14000+14000 30,50028000+14000 16,50042000+14000 Cost less Accumulated Dep 2009 2010 2011 2012 72,500-28,000 72,500-42,000 72,500-56,000 72, 500-66, 500 till Sep 2013 6,000 -56000+10500 (14,000/129 10,500)

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