(New Deli is in the process of closing its operations. It sold its three-year-ol
ID: 2518480 • Letter: #
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(New Deli is in the process of closing its operations. It sold its three-year-old ovens to Sicily Pizza for $312,300. The ovens originally cost $416,500 and had an estimated service life of 10 years and an estimated residual value of $26,500. New Deli uses straight-line depreciation for all equipment.)
IThe owovong Anformaron applies to the quesroris displayeo below.] New Del is in t the process of closing its operobons. it sold its three-year-old ovens to Sclly Pizzo for 5312.300. The ovens onginally cos 5416,500 and had on estimated service Ife of 10 yeors ond on estimoced residual value of 526,500. New Deli uses sroignt-ine deprecioon for all equipmem pme Required nExplanation / Answer
Answer 1 Depreciation per year using straight line method = (Cost - estimated Residual Value) / Estimated service life Depreciation per year using straight line method = ($416500 - $26500)/10 years = $39,000 Accumulated depreciation at the end of the third year = $39000 * 3 years = $1,17,000 Answer 2 Book value of ovens at the end of the third year = Cost - Accumulated depreciation = $416500 - $117000 = $2,99,500 Answer 3 Gain or loss on sale of the ovens at the end of the third year = Sale value - Book value at the end of third year Gain or (loss) on sale of the ovens at the end of the third year = $312300 - $299500 = $12,800 Answer 4 Recording of sale of the ovens at the end of third year Transaction General Journal Debit Credit 1 Cash $312,300.00 Accumulated depreciation $117,000.00 Ovens $416,500.00 Gain on sale of ovens $12,800.00
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