16) Shug Jordan Co recently purchased a piece of equipment for $100,000 on Janua

Question

16) Shug Jordan Co recently purchased a piece of equipment for $100,000 on January 1, 2010. The equipment has a residual value of $8,000 and a useful life of 5 years. Assuming that Shug Jordan Co uses the straight line method of depreciation, what is the book value of the asset at Dec 31, 2011? a. $18,400 b. $81,600 c. $44,800 d. $63,200 17) Assume the same info as in problem 16. Shug Jordan Co sells the equipment on Dec 31, 2012 for $45,000. The Journal Entry to reflect this sale would be: Accumulated Depreciation Equipment Accumulated Depreciation Equipment Accumulated Depreciation Equipment Equipment a. Cash 45,000 55,200 Gain on Disposal 200 100,000 b. Cash 45,000 18,400 36,600 Loss on Disposal 100,000 c. Cash 45,000 55,200 Loss on Disposal 200 100,000 d. Cash 45,000 45,000

Explanation / Answer

16) Book value of december 31,2011 :

Straight line dep = (100000-8000/5) = 18400 per year

Accumlated dep on december 31, 2011 = 18400*2 = 36800

Book value of december 31,2011 = 100000-36800 = 63200

so answer is d) $63,200

17) Journal entry :

so answer is a)

Date accounts & Explanation debit credit Cash 45000 Accumlated depreciation 55200      Gain on disposal 200      Equipment 100000

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