Question

[The following information applies to the questions displayed below) New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest Bakery tor s The ovens originally cost $690,000, had an estimated service life of 10 year 500,000 s, and an estimated residual value of $40,000 New Morning Bakery uses the straight-ine depreclation method for all equipment value 1.53 points Required 1. Calculate the balance in the accumulated depreciation account at the end of the second year References eBook & Resources

Answer 1

Straight line Method
A	Cost	$   690,000.00
B	Residual Value	$     40,000.00
C=A - B	Depreciable base	$   650,000.00
D	Life [in years left ]	10
E=C/D	Annual SLM depreciation	$     65,000.00

Year	Book Value	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$      690,000.00	$     65,000.00	$ 625,000.00	$     65,000.00
2	$      625,000.00	$     65,000.00	$ 560,000.00	$   130,000.00

Requirement 1

Accumulated depreciation =$130,000

Requirement 2

Book value =$ 560,000

Requirement 3

Loss=$60000

Straight line
Cost	$        690,000.00
Accumulated depreciation	$        130,000.00
Book value	$        560,000.00
Sales price	$        500,000.00
Book value	$        560,000.00
Gain /(loss)	$        (60,000.00)

Requirement 4

Transaction	General Journal	Debit	Credit
1	Cash	$ 500,000.00
	Accumulated Depreciation-Equipment	$ 130,000.00
	Loss on sale of Equipment	$    60,000.00
	Equipment		$ 690,000.00
	(Equipment sold)