On March 31, 2021, Management of quality appliances committed to a plan to sell equipment. The...
On March 31, 2021, Management of quality appliances committed to a plan to sell equipment. The equipment was available for immediate sale, and an active plan to locate a buyer was initiated. The equipment had been purchased on January 1, 2019 for $260000. The equipment had an estimated six-year service life and a residual value of $20000. The equipment was being depreciated using the straight-line method. Quality's fiscal year ends on December 31.
Prepare the journal entry for the 2021 depreciation expense
What is the equipment's book value as of March 31,2021?
By December 31, 2021 the equipment has not been sold, but management expects that it will be sold in 2022 for $150000. For what amount is the equipment reported in the December 31, 2021 balance sheet. Please prepare appropriate journal entries
Homework Answers
a) Journal entry
| Date | account and explanation | Debit | Credit |
| 2021 | Depreciation expense (260000-20000/6)*3/12 | 10000 | |
| Accumulated depreciation-equipment | 10000 | ||
b) Accumulated depreciation = (260000-20000/6)*2+10000 = 90000
Book value as of March 31,2021 = 260000-90000 = $170000
c) Equipment reported as on December 31,2021 = 260000-(260000-20000/6*3) = 140000
| Date | account and explanation | Debit | Credit |
| Cash | 150000 | ||
| Accumulated depreciation-equipment | 140000 | ||
| Gain on sale of equipment | 30000 | ||
| equipment | 260000 |
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