Disposal of Fixed Asset Equipment acquired on January 6 at a cost of $220,800, h
ID: 2396642 • Letter: D
Question
Disposal of Fixed Asset
Equipment acquired on January 6 at a cost of $220,800, has an estimated useful life of 10 years and an estimated residual value of $28,800.
a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation?
Year Depreciation Expense
Year 1 $
Year 2 $
Year 3 $
b. What was the book value of the equipment on January 1 of Year 4? $
c. Assuming that the equipment was sold on January 3 of Year 4 for $155,000, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
Cash
Accumulated Depreciation-Equipment
Loss on Sale of Equipment
Equipment
d. Assuming that the equipment had been sold on January 3 of Year 4 for $166,500 instead of $155,000, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
Cash
Accumulated Depreciation-Equipment
Equipment
Gain on Sale of Equipment
Explanation / Answer
a) Calculate depreciation expense :
Year 1 = (220800-28800/10) = 19200
Year 2 = 19200
Year 3 = 19200
b) Book value of equipment on january 1 of year 4 = 220800-(19200*3) = $163200
c) Journal entry :
d) Journal entry :
Date account & expalantion debit credit Cash 155000 Accumlated depreciation 57600 Loss on Sale of Equipment 8200 Equipment 220800 (To record sale of equipment)