Question

Adelphi Company purchased a machine on January 1, 2017, for $70,000. The machine was estimated to have a service life of ten years with an estimated residual value of $5,000. Adelphi sold the machine on January 1, 2021 for $28,000. Adelphi uses the double declining method for depreciation. Using this information, how much is the gain or (loss) for the equipment sale entry made on January 1, 2021. Enter a loss as a negative number.

Answer 1

Loss on sale = $-672

Cost	$         70,000.00
Accumulated depreciation	$         41,328.00
Book value	$         28,672.00
Sales price	$         28,000.00
Book value (at the end of dec 31 2020)	$         28,672.00
Gain /(loss)	$            (672.00)

Working

Double declining Method
A	Cost	$        70,000.00
B	Residual Value	$           5,000.00
C=A - B	Depreciable base	$        65,000.00
D	Life [in years]	10
E=C/D	Annual SLM depreciation	$           6,500.00
F=E/C	SLM Rate	10.00%
G=F x 2	DDB Rate	20.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
2017	$      70,000.00	20.00%	$      14,000.00	$      56,000.00	$      14,000.00
2018	$      56,000.00	20.00%	$      11,200.00	$      44,800.00	$      25,200.00
2019	$      44,800.00	20.00%	$         8,960.00	$      35,840.00	$      34,160.00
2020	$      35,840.00	20.00%	$         7,168.00	$      28,672.00	$      41,328.00