Comprehensive problem equipment was acquired at the beginning of the year at a c

Question

Comprehensive problem

equipment was acquired at the beginning of the year at a cost of 600,000. The equipment was depreciated using the staright-line method based upon an estimated useful life of 40 years and an estimated residual value of $40,000

Assume the equipment was sold on August 31 of year 3 for 575,000 record the journal entry for the sale of this piece of equipment

B) Instead assume the equipment was sold on august 31 of year 3 for $45,000 record the jounal entry for the sale of equipment

Explanation / Answer

Cost of the equipment 600000 Salvage value 40000 Useful life 40 years SLM depriciation pa = ( 600000 - 40000)/40                                          = 14000 pa A) Asset sold on August 31 of year 3 = 32 months Depriciation for 32 months      = 14000 /12* 32                                                             = 37333.33 WDV = Orginal cost - depriciation Original cost 600000.00 Accumulated depriciation 37333.33 WDV 562666.67 Selling price 575000.00 Gain 12333.33 JE for sale Cash Dr 575000.00 Accumulated depriciation Dr 37333.33          Equipment Cr 600000.00          Gain on sale of equipment Cr 12333.33 ( To record sale of equipment) B) Asset sold on August 31 of year 3 = 32 months Depriciation for 32 months      = 14000 /12* 32                                                             = 37333.33 WDV = Orginal cost - depriciation Original cost 600000.00 Accumulated depriciation 37333.33 WDV 562666.67 Selling price 45000.00 Loss 517666.67 JE for sale Cash Dr 45000.00 Accumulated depriciation Dr 37333.33 Loss on sale of equipment Dr 517666.67          Equipment Cr 600000.00 ( To record sale of equipment)

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