Question

purchased merchandise on account from Martin co

Entries for Sale of Fixed Asset Equipment acquired on January 8 at a cost of $139,250 has an estimated useful life of 16 years, has an estimated residual value of $7,250, 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? Check My Work Book value is the initial cost of the fixed asset minus the accumulated depreciation. b. Assume that the equipment was sold on April 1 of the fifth year for $98,042 amount box does not require an entry, leave it blank. Round your 1. Journalize the entry to record depreciation for the three months until the sale date. If an answers to the nearest whole dollar if required. Depreciation Expense-Equipment Accumulated Depreciation-Equipment

Answer 1

Depreciation per year (as per straight line method) = ( Cost - Estimated residual value ) / Estimated useful life = ( 139250 - 7250 ) / 16	8250
Accumulated depreciation for 4 years = Depreciation per year * 4 = 8250 * 4	33000

a.
Book value of the equipment at December 31 at the end of the fourth year = Initial Cost - Accumulated depreciation for 4 year = 139250 - 33000	106250

b.
1.
Depreciation for 3 months = Depreciation per year * 3/12 = 8250 * 3/12	2063

Journal entry :
Depreciation expense - equipment	2063
Accumulated depreciation - equipment		2063

2.
Accumulated depreciation till the date of sale = Accumulated depreciation for 4 years + Depreciation expense for 3 months = 33000 + 2063	35063

Journal entry :
Cash	98042
Accumulated depreciation-Equipment	35063
Loss on sale of equipment ( 139250 - 98042 - 35063 )	6145
Equipment		139250