Question

Questions: Nix Company owns equipment that cost $140,000 when purchased on January 1, 2011. It has been depreciated using the straight-line method based on estimated salvage value of $14,000 and an estimated useful life of 10 years. (3 Marks) Instructions: Prepare Nix Company's journal entries to record the sale of the equipment in these four independent situations. Update depreciation on assets disposed of at time of sale. (a) Sold for $80,000 on January 1, 2014. (b) Sold for $80,000 on April 1, 2014 (c) Sold for $30,000 on January 1, 2014. (d) Sold for $30,000 on September 1, 2014. (e) Repeat (a), assuming Nix uses double-declining balance depreciation. (e) Repeat (C), assuming Nix uses double-declining balance depreciation

Answer 1

calculation of Depreciahon using stnght line Basis cast of Asset – salvage value) / useful life < ($140000 – $14000)/10 Annual Depreciation - $ 12600 6 Equipment written down value os on Jan 2014 Dep for 3 years - 12600 X 3 = $37800 Woilten down value - $140000 - $ 37800 - $ 102200 - sold for $ 80000 Then loss on sale is ($ 102200 - 80000) A - $ 22200 - Entry • Bank alc o r 80000 Profit a loss ale or 22200 - TO Equipment ale 102200 b) If sold for 80000 on Arouli 2014 wor as on Aprili 2014 wor ay on. Jani 2014 - 102200 (-) Dep for 3m 12600x3/2 = 3150 woron April 14 $99050 LOSS on sale 99050 - 80000 = $ 19050 Entry Bank al or profit a loss al br TO equipment 80000 19050 99050

sold for 30000 on Jani 14 WDV 6) on Jani 2014 - Equipment sold loss on sale of equipment $ 102200 (30000) $72200 Bank al Dr 30000 profit a loss al or 72200 70 Equipment 102200 3D sold for $ 30000 on sept 2014 WDV on Toni 14 102200 Dep for 8 monto 12600 x 80 8400 wDY on sepi 14 93800 loss on sale = 93900 - 30000 3 63900 Entry Bank ale nr 30000 noofto loss al ny 63800 TO Equipment 93800

@ Repeat (a) using Double Declining method Dep - 2* Strignd lime Dep 7. * BOOK value @ begginning) Del for 2011 = 2 x 10-. X 140000 = $ 28000 WDY on Jan I 2012 - 140000 - 28000 - $ 112000 Dep for 2010 = 28100.X112000 - $ 99000 war on Tan I 2013 (112000-22400) - $ 89600 Der for 2013 2x101. 4 gaboo = $17920 war on Jani 2014 (89600 – 17920) - $ 71680 Mokit on sale of asset - 80000 - 71680 $8320 Bant al or 80000 to profit or loss 8320 70 Equipment 71680 sold for 30000 on Tani 14, D.Dm - war on Tan I iu = $71680 :loss on sale 71680- 30000 - 41680 Bank ale or 30000 Mofit? Loss Dr 611680 to Equipment 71680