Equipment with a useful life of 5 years and a residual value of $6,000 was purch
ID: 2347579 • Letter: E
Question
Equipment with a useful life of 5 years and a residual value of $6,000 was purchased on January 3, 2006, for $48,500. The machine was sold on January 5, 2011, for $13,000.a. What is the book value of the machine on January 5, 2011, assuming straight-line depreciation is used?
$
b. Illustrate the effects on the accounts and financial statements of the sale of the machine on January 5, 2011.
c. Illustrate the effects on the accounts and financial statements of the sale of the machine if it had been sold for $18,000 instead.
Assets = Liabilities + Stockholders' Equity
Cash Equipment Accumulated Depreciation Capital Stock Retained Earnings
(b)
(c)
Statement of Cash Flows Income Statement
(b) (b)
(c) (c)
Explanation / Answer
Equipment with a useful life of 5 years and a residual value of $6,000 was purchased on January 3, 2006, for $48,500. The machine was sold on January 5, 2011, for $13,000.
a. What is the book value of the machine on January 5, 2011, assuming straight-line depreciation is used?
$6,000 (48,500 - 42,500) Cash
b. Illustrate the effects on the accounts and financial statements of the sale of the machine on January 5, 2011.
c. Illustrate the effects on the accounts and financial statements of the sale of the machine if it had been sold for $18,000 instead.
Assets = Liabilities + Stockholders' Equity
Cash Equipment Accumulated Depreciation Capital Stock Retained Earnings
(b)
(c)
Statement of Cash Flows Income Statement
(b) (b) 13,000
(c) (c)18,000
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