Exercise 10-17 Entries for Sale of Fixed Asset Equipment acquired on January 5,

Question

Exercise 10-17 Entries for Sale of Fixed Asset Equipment acquired on January 5, 2009, at a cost of $380,000, has an estimated useful life of 16 years, has an estimated residual value of $40,000, and is depreciated by the straight-line method. a. What was the book value of the equipment at December 31, 2012, the end of the year? $ b. Assume that the equipment was sold on July 1, 2013, for $270,000. Hide 1. Journalize the entry to record depreciation for the six months until the sale date. Hide 2. Journalize the entry to record the sale of the equipment. If an amount box does not require an entry, leave it blank or enter "0".

Explanation / Answer

a. What was the book value of the equipment at December 31, 2010, the end of the year? (504,000 - 42,000) / 12 = 38,500 Depreciation per year 504,000 - (38,500 x 4) = 350,000 Book Value b. Assuming that the equipment was sold on April 1, 2011, for $315,000, journalize the following entries: 1. Journalize the entries to record depreciation for the three months until the sale date. Dr Depreciation Expense, Equipment 9,625 (38,500 x 3/12) Dr Accumulated Depreciation, Equipment 9,625 2. Journalize the entries to record the sale of the equipment. If an amount box does not require an entry, leave it blank. Accumulated depreciation is (38,500 x 4) + 9,625 = 163,625 Book value is 504,000 - 163,625 = 340,375 Dr 315,000 Dr Accumulated Depreciation, Equipment 163,625 Cr Gain on Sale of Equpment 25,375 (340,375 - 315,000) Cr Equipment 504,000

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