Equipment was acquired at the beginning of the year at a cost of $562,500. The e
ID: 2330987 • Letter: E
Question
Equipment was acquired at the beginning of the year at a cost of $562,500. The equipment was depreciated using the straight-line method based on an estimated useful life of 9 years and an estimated residual value of $40,600. a. What was the depreciation for the first year? Round your answer to the nearest cent.
b. Using the rounded amount from Part a in your computation, determine the gain(loss) on the sale of the equipment, assuming it was sold at the end of year eight for $92,889. Round your answer to the nearest cent and enter as a positive amount.
c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank. Round your answers to the nearest cent.
Explanation / Answer
Requirement a
Depreciation for the First Year
$ 65,237.50
Requirement b
A
Cost of Equipment
$ 562,500.00
B
Total Accumulated Depreciation on Equipment
$ 521,900.00
C=A - B
Book Value of Asset
$ 40,600.00
D
Sale Consideration
$ 92,889.00
E=D-C
Profit on sale of Equipment
$ 52,289.00
Requirement c
Journal Entry for Sale of Asset
General Journal
Debit
Credit
Cash
$ 92,889.00
Accumulated Depreciation-Equipment
$ 521,900.00
Equipment
$ 562,500.00
Profit on sale of Equipment
$ 52,289.00
(Equipment Sold)
Working note
Straight line Method
A
Cost
$ 562,500.00
B
Residual Value
$ 40,600.00
C=A - B
Depreciable base
$ 521,900.00
D
Life [in years]
8
E=C/D
Annual SLM depreciation
$ 65,237.50
Year
Book Value
Depreciation expense
Ending Book Value
Accumulated Depreciation
1
$ 562,500.00
$ 65,237.50
$ 497,262.50*
$ 65,237.50
2
$ 497,262.50
$ 65,237.50
$ 432,025.00
$ 130,475.00**
3
$ 432,025.00
$ 65,237.50
$ 366,787.50
$ 195,712.50
4
$ 366,787.50
$ 65,237.50
$ 301,550.00
$ 260,950.00
5
$ 301,550.00
$ 65,237.50
$ 236,312.50
$ 326,187.50
6
$ 236,312.50
$ 65,237.50
$ 171,075.00
$ 391,425.00
7
$ 171,075.00
$ 65,237.50
$ 105,837.50
$ 456,662.50
8
$ 105,837.50
$ 65,237.50
$ 40,600.00
$ 521,900.00
*Beginning Book value –Depreciation expense
**Accumulated depreciation of till end of last year +Depreciation expense of Current year
Requirement a
Depreciation for the First Year
$ 65,237.50
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