ann Corporation purchased an equipment on July 1.2016, for $800.000. Management

ID: 2393596 • Letter: A

Question

ann Corporation purchased an equipment on July 1.2016, for $800.000. Management depreciated Question S: 10 Points the equipment using double-dectining balance, with an estimated useful life of ten residual value On June 30,2018, Jann Corp decided to sell the equipment to Murry Corp for $650,000. Prepare the journal entry to record the sale of equipment. Account stion 6: 20 Points pril 1,2018. ABC purchased an existing factory for 2 million. The price included title to the factory building, manufacturing equipment. and a patent on a process the equipment At the time of the purchase, the assets fair value were $450k $875k nd pment S625k ni $550k npany placed the assets into use on June 1, 2018 and decided that salvage value and life of the assets purchased would be: set Salvage Value Estimate Life-(r

Explanation / Answer

QUESTION - 5

Journal Entry to record the sale of Equipment

Account Titles and Explanation

Debit ($)

Credit ($)

Cash A/c

650,000

Accumulated Depreciation - Equipment

281,600

To Equipments A/c

800,000

To Gain on sale of Equipment A/c

131,600

[Journal Entry to record the sale of Equipment]

Cost of the Equipment = $800,000

Depreciation using Double Declining Balance Method

Depreciation Expense = Beginning Balance x 2 x Straight Line Depreciation Rate

Straight Line Depreciation Rate = 1 / Useful Life = 1 / 10 = 0.10

Depreciation, 2016 = [$800,000 x 2 x 0.10] x 6/12 = $80,000

Depreciation, 2017 = [$800,000 – 80,000] x 2 x 0.10 = $144,000

Depreciation, 2018 = [($800,000 – 80,000 – 144,000) x 2 x 0.10] x 6/12 =$57,600

Total Accumulated Depreciation up to June 30,2018

= $80,000 + 144,000 + 57,600

= $281,600

Book Value as on June 30,2018

= Cost of the Equipment – Accumulated Depreciation

= $800,000 – 281,600

= $581,400

Sale Proceeds of the Equipment = $650,000

Therefore, Gain on sale of Equipment

= Sales proceeds – Book Value

= $650,000 – 581,400

= $131,600