EX 10-18 Disposal of fixed asset OBJ. 3 Equipment acquired on January 6 at a cos
ID: 2393103 • Letter: E
Question
EX 10-18 Disposal of fixed asset OBJ. 3 Equipment acquired on January 6 at a cost of $375,000 has an estimated useful life of 20 years and an estimated residual value of $25,000. a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation? b. What was the book value of the equipment on January 1 of Year 4? Assuming that the equipment was sold on January 3 of Year 4 for $300,000, journalize the entry to record the sale . that the equipment had been sold on January 3 of Year 4 for $325,000 instead of $300,000, journalize the entry to record the sale,Explanation / Answer
a
what is the annual amount of depreciation for the years 1-3 using straight line method of depreciation
$
Cost
375000
Less: Residual value
25000
350000
useful life
20 years
Depreciation
17500
Year 1
17500
Year 2
17500
Year 3
17500
b
what was the book value of the equipment of January 1 of year 4
375000-[17500*3]
322500
c
Assuming that the equipment sold on January 3 of year 4 for $300,000
General journal
Debit
credit
Cash
300000
Loss on sale of equipment
22500
Accumulated depreciation – equipment
52500
Fixed Asset
375000
d
Assuming that the equipment had been sold on january 2 of year 4 for 325000
General journal
Debit
credit
Cash
325000
Accumulated depreciation
52500
Fixed asset
375000
Gain on disposal of equipment
2500
a
what is the annual amount of depreciation for the years 1-3 using straight line method of depreciation
$
Cost
375000
Less: Residual value
25000
350000
useful life
20 years
Depreciation
17500
Year 1
17500
Year 2
17500
Year 3
17500
b
what was the book value of the equipment of January 1 of year 4
375000-[17500*3]
322500
c
Assuming that the equipment sold on January 3 of year 4 for $300,000
General journal
Debit
credit
Cash
300000
Loss on sale of equipment
22500
Accumulated depreciation – equipment
52500
Fixed Asset
375000
d
Assuming that the equipment had been sold on january 2 of year 4 for 325000
General journal
Debit
credit
Cash
325000
Accumulated depreciation
52500
Fixed asset
375000
Gain on disposal of equipment
2500
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