Question

Entries for Sale of Fixed Asset Equipment acquired on January 8 at a cost of $163,700, has an estimated useful life of 16 years, has an estimated residual value of $9,300, and is deprecated 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 117,352 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. 2. Joumalize 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

Answer 1

Requirement a:

Depreciation Expense = [(Cost - Residual value)/Estimated useful life)]

= ($163,700-$9,300)/16

= $154,400/16

= $9,650

Cost	$163,700
Accumulated depreciation (9,650 x 4 years)	($38,600)
Book value at the end of fourth year	$125,100

Requirement b:

1.To record depreciation expense for 3 months

Depreciation expense (9,650 x 3/12)	$2,413
Accumulated depreciation		$2,413

2. To record sale of equipment

Cash	$117,352
Accumulated depreciation (125,100+2,413]	$127,513
Equipment		$163,700
Gain on sale of equipment		$81,165