Question

Problem 7-8B Record the disposal of equipment (LO7-6)

[The following information applies to the questions displayed below.]

New Deli is in the process of closing its operations. It sold its three-year-old ovens to Sicily Pizza for $320,500. The ovens originally cost $427,500, had an estimated service life of 10 years, had an estimated residual value of $27,500, and were depreciated using straight-line depreciation. Complete the requirements below for New Deli.

Required information Problem 7-8B Record the disposal of equipment (LO7-6) [The following information applies to the questions displayed below.] New Deli is in the process of closing its operations. It sold its three-year-old ovens to Sicily Pizza for $320,500. The ovens originally cost $427,500, had an estimated service life of 10 years, had an estimated residual value of $27,500, and were depreciated using straight-line depreciation. Complete the requirements below for New Deli Problem 7-8B Part 1 Required: 1. Calculate the balance in the accumulated depreciation account at the end of the third year. Accumulated depreciation

Answer 1

Depreciation = (Cost - Salvage value) /Useful life

1) Accumulated Depreciation

= (427,500-27,500)/10 * 3

= 120,000

​​​​​​2) Book value = Cost - Accumulated Depreciation

= 427,500 - 120,000

= 307,500

3) Gain (Loss) = Cash received - Book value

= 320,500 - 307,500

Gain of 13,000

Cash	320,500
Accumulated Depreciation - oven	120,000
Gain on sale of oven		13,000
Oven		427,500