Question

Entries for Sale of Fixed Asset

Equipment acquired on January 8 at a cost of $138,780, has an estimated useful life of 14 years, has an estimated residual value of $9,700, 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?
$

b. Assuming that the equipment was sold on April 1 of the fifth year for 94,035.

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. Journalize 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)] = [(138,780-9,700)/14] = $9,220

Cost	$138,780
Accumulated depreciation (9,220 x 4 years)	($36,880)
Book value at Dec 31 the end of the fourth Year	$101,900

Requirement b:

1. Entry for three month's depreciation:

Account title and explanation	Debit	Credit
Depreciation expense (9,220 x 3/12)	$2,305
Accumulated depreciation-equipment		$2,305
[To record depreciation expense]

2. Entry for Sale:

Account title and explanation	Debit	Credit
Cash	$94,035
Accumulated depreciation-equipment (36,880+2,305)	$39,185
Loss on sale of equipment	$5,560
Equipment		$138,780
[To record sale of equipment]