Question

Sale of Equipment Equipment was acquired at the beginning of the year at a cost of $35,750. The equipment was depreciated using the double-declining- balance method based on an estimated useful life of ten years and an estimated residual value of $690. a. What was the depreciation for the first year? $ b. Assuming the equipment was sold at the end of year 2 for $8,800, determine the gain or loss on the sale of the equipment. Loss 2 Feedback Check My Work Book value is the asset cost minus accumulated depreciation. In the first year, the balance in the accumulated depreciation account is zero. Compare the book value to the sale price. If the book value is more than the sale price, the equipment was sold for a loss. If the book value is less than the sale price, the equipment was sold for a gain. c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank. Cash ✓ Accumulated Depreciation Equipment Loss on Sale of Equipment Equipment

Answer 1

a
Double declining Depreciation rate	20%	=1/10*2
a
Depreciation for first year	7150	=35750*20%
b
Depreciation for second year	5720	=(35750-7150)*20%
Book value of Equipment	22880	=35750-7150-5720
Loss on sale	14080	Loss	=22880-8800
c
Cash	8800
Accumulated Depreciation-Equipment	12870		=7150+5720
Loss on sale of Equipment	14080
Equipment		35750