Equipment acquired on January 6, 2013, at a cost of $335,190, has an estimated u

Question

Equipment acquired on January 6, 2013, at a cost of $335,190, has an estimated useful life of 13 years and an estimated residual value of $68,690. Required: A. What was the annual amount of depreciation for the years 2013, 2014, and 2015 using the straight-line method of depreciation? B. What was the book value of the equipment on January 1, 2016? C. Assuming that the equipment was sold on January 3, 2016, for $256,655, journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles. D. Assuming that the equipment had been sold on January 3, 2016, for $287,515 instead of $256,655, journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles.

Explanation / Answer

Requirement A

Depreciation = ( cost - salvage) / expected useful life = ( 335,190 - 68,690 ) / 13 = 20,500 per year fo 13 years

Depreciation for 2013 = $ 20,500

Depreciation for 2014 = $ 20,500

Depreciation for 2015 = $ 20,500

Requirement B

Book Value = Cost - Accumulated deprecation = 335,190 - ( 20,500 X 3) = $ 273,690

Requirement C

Cash Dr $ 256,655

Accumulated depreciation Dr $ 61,500

Loss on sale of Equipment Dr $ 17,035

Equipment Cr $ 335,190

Requirement D

Cash Dr $ 287,515

Accumulated depreciation Dr $ 61,500

Profit on sale of Equipment Cr $ 13,825

Equipment Cr $ 335,190

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