Question

Entries for Sale of Fixed Asset

Equipment acquired on January 8 at a cost of $120,720, has an estimated useful life of 13 years, has an estimated residual value of $7,750, 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 76,992.

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

Answer:

Computation of Depreciation expense per year
		Amount($)
	Cost of equipment purchased on January 8,	1,20,720
Less:	Estimated residual value	7,750
	Depreciable value of equipment	1,12,970
Divide:	Life of asset in years	13 years
	Depreciation expense per year	8,690
a)Computation of Book value of equipment as on December 31,the end of 4th year
	Purchase cost / Book value of equipment as on January 8, 1st year	1,20,720
Less:	Depreciation expense for 1st year	8,690
	Book value of equipment as on December 31,1st year	1,12,030
Less:	Depreciation expense for 2nd year	8,690
	Book value of equipment as on December 31, 2nd year	1,03,340
Less:	Depreciation expense for 3rd year	8,690
	Book value of equipment as on December 31, 3rd year	94,650
Less:	Depreciation expense for 4th year	8,690
	Book value of equipment as on December 31, 4th year	85,960

b) Journal entries
Date	Account Title	Debit($)	Credit($)
5th year	Depreciation expense-equipment(8690/12*3)	2,173
April 1.	Depreciation expense-equipment		2,173
	(Being depreciation recorded on equipment for 3 months)
April 1.	Cash	76,992.00
	Accumulated depreciation ($8,690 x 4.25 years)	36,932.50
	Loss on sale of equipment (bal. fig)	6,795.50
	Equipment		1,20,720.00
	(Being equipment sold and loss recorded)