EX 9-17 Entries for sale of fixed asset OBJ. 3 Equipment acquired on January 8,

Question

EX 9-17 Entries for sale of fixed asset OBJ. 3 Equipment acquired on January 8, 2013, at a cost of $140,000, has an estimated useful life of 16 years, has an estimated residual value of $8,000, and is depreciated by the straight-line method.a. What was the book value of the equipment at December 31, 2016, the end of the year? b. Assuming that the equipment was sold on July 1, 2017, for $96,700, journalize the entries to record

(1) depreciation for the six months until the sale date, and

(2) the sale of the equipment.

Explanation / Answer

a. What was the book value of the equipment at December 31, 2016, the end of the year

= Origianl Cost - Depreciation Till Date

= 140,000 - (140,000-8,000)*(3*16)

= 140,000 - 24,750

= $115,250

..

..

b. Assuming that the equipment was sold on July 1, 2017, for $96,700

1)Depreciation for the six months until the sale date = (140,000-8,000)*/16 *(1/2)

= 8250*0.5

= $4,125

Journal

Debit Depreciation = 4125

Credit Equipment = 4125

..

2)Book value of the equipment as on July-1,2017 = 115,250-4125

= $111,125

Sale Value = $96,700

Loss on slae of Equipment = 111,125 - 96,700

= $14,425

Journal Entry on sale of equipment

Debit Cash = 96,700

Debit Loss on sale of equipment = 14,425

Credit Equipment = 111,125

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