Equipment acquired on January 8 at a cost of $144,930 has an estimated useful li
ID: 2512406 • Letter: E
Question
Equipment acquired on January 8 at a cost of $144,930 has an estimated useful life of 14 years, has an estimated residual value of $8,850, and is depreciated by the straight-line method A. What was the book value of the equipment at December 31 the end of the fourth year? B. Assuming that the equipment was sold on April 1 of the fifth year for $98,290, journalize the entries to record (1) depreciation for the three months until the sale date and (2) the sale of the equipment. Refer to the Chart of Accounts for exact wording of account titles Round your answer to the nearest whole dolarExplanation / Answer
Answer : A) CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD Purchase Cost of Equipment $ 1,44,930.00 Less: Salvage Value $ 8,850.00 Net Value for Depreciation $ 1,36,080.00 Usefule life of the Assets 14 years Depreciation per year = Value for Depreciation / 14 years = 9,720.00 Total Depreciation in 4 years = ($ 9,720 X 4)= 38,880.00 Book Value = Purchae price - Total Depreciation = Purchase Price = $ 1,44,930 Less By "- " By Total Depreciation in 4 years = $ 38,880 Book value at the end of 4 years = $ 1,06,050 Answer : B) Calculation of the Book Value as on April 01 Book Value at the end of 4th year = $ 1,06,050 Depreciation for the 3 months $ 2,430 Book Value = $ 1,03,620 Sale Value $ 98,290 Loss on sales $ 5,330 Journal Entries Date Account Title and explanation Debit Credit April, 01 5th year Depreciation (9,720 X 3 / 12) $ 2,430 To Equipmet $ 2,430 (To Record the depreciation for 3 monts) April, 01 5th year Cash $ 98,290 Loss on sale of Equipmet $ 5,330 To Equipment $ 1,03,620 (To Record the sale of Equipment)
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