Instructions Equipment was acquired at the beginning of the year at a cost of $6

Question

Instructions Equipment was acquired at the beginning of the year at a cost of $612,500. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of 9 years and an estimated residual value of $43,930. A. What was the depreciation for the first year? Round your intermediate calculations to 4 decimal places. Round the depreciation for the year to the nearest whole dollar. B. Assuming that the equipment was sold at the end of the second year for $605,702, determine the gain or loss on the sale of the equipment. C. Journalize the entry on Dec. 31 to record the sale. Refer to the Chart of Accounts for exact wording of account titles

Explanation / Answer

A) Cost of Equipment       612,500.00 Life   9 Years Double decling balance method rate = 1/9%*2 22.22% Depreciation at 22.22% = 612500*22.22%       136,111.11 B) Value at end of first year = 612500 - 136,111.11       476,388.89 Depreciation for second year = 476388.89*22.22%       105,864.20 Gain on Sale =Sale Value + Depreciation - purchase cost = 605,702 + 241975.31 - 612500       235,177.31 C) Cash dr       605,702.00 Accumulated Depreciation Dr       241,975.31 To Equipment       612,500.00 To profit on sale of equipment       235,177.31

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