Instructions First Questions Equipment acquired on January 6 at a cost of $335,1
ID: 2528094 • Letter: I
Question
Instructions First Questions Equipment acquired on January 6 at a cost of $335,190, has an estimated useful life of 13 years and an estimated residual value of $6B,690 A. VWhat was the annual amount of depreclation for the Years 1- 3 using the straight-line method of depreclation? A. What was the annual amount of dopreciation for the Years 1-3 using the straight line method of dopreciation? 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 $256,655, journalize the entry to record the sale. Refer to the Chart of Year 1 depreciation Accounts for exact wording of account mes Year 2 depreciation hat the eqipment had been said on 3 of Year 4 for $287,515 instead of $256,655, the to record the sale Year 3 depreciation OURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST, REF DEBIT CREDIT ASSETS LIABILUTIES EQUITY B. What was the book valu?of the equipment on January 1 of Year 4? S lan.3 D. Assuming that the equipment had boon sold on January 3 of Yoar 4 for $287,515 instoad of $256,655, journalize the entry to record the sale. Refor to the Chart of Accounts for exact wording of account tines. PAGE 1 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF DEBIT CREDIT ASSETS LIABILITIES ECUITYExplanation / Answer
A) cost of acuisition = $ 335190
Estimated life value = 13 years
Estimated residual value = $ 68690
Depreciation under straight line method :
Year 1
Depreciation =Acquisition cost - residual value / estimated life = 3,35,190 - 68,690 / 13 = $ 20500
Year 2
Depreciation = $ 20500
Year 3
Depreciation = $ 20500
Depreciation expense under straight line method will be same for every year.
B) Book value of equipment on jan 1 year 4 :
Acquisition cost of year 1 335190
Less: Depreciation for year 1 (20500)
Book value at end of year 1 314690
Less: Depreciation for year 2 (20500)
Book value at end of year 2 294190
less: Depreciation for year 3 (20500)
Book value at end of year3 273690
I.e., opening book value as on jan1 year 4 = $ 273690
c) Assume as a cash sale :
Cash A/c Dr $ 256655
Accumulated depreciation A/c Dr $ 61500
Loss on sale of equipment A/c Dr $ 17035
To Equipment A/c $ 335190
( being equipment sold for $ 256655 results in a loss of $ 17035 )
D) Cash A/c Dr $ 287515
Accumulated depreciation Dr $ 61500
To gain on sale of equipment $ 13825
To equipment A/c $ 13825
(being equipment sold and results in gain of $ 13825 )
Note:
At the end of every year depreciation balance will be transferred to accumulated depreciation a/c.