Question

Equipment acquired on January 8 at a cost of $212,000 has an estimated useful life of 15 years, has an estimated residual value of $14,000, and is depreciated by the straight-line method.

a. What was the book value of the equipment at December 31 the end of the fifth year?

Assume that the equipment was sold on April 1 of the sixth year for $105,800.

1. Journalize the entry to record depreciation for the three months until the sale date. If an amount box does not require an entry, leave it blank.

Depreciation expense-equipment

Accumulated depreciation-equipment

2. Journalize the entry to record the sale of the equipment. If an amount box does not require an entry, leave it blank.

Cash

Accumulated Depreciation-equipment

Loss on Sale of Equipment

Equipment

Answer 1

• Working

A	Cost	$          212,000.00
B	Residual Value	$            14,000.00
C=A - B	Depreciable base	$          198,000.00
D	Life [in years]	15
E=C/D	Annual SLM depreciation	$            13,200.00

• Requirement [a]

>5 year accumulated Depreciation - $ 13200 x 5 = $ 66,000
>Answer
Book Value at the end of 5^th year = $ 212,000 - $ 66000
= $ 146,000

• Requirement 1
  >3 month depreciation to be updated = $ 13200 x 3/12 = $ 3,300
  

Date	Accounts title	Debit	Credit
1 April Year 6	Depreciation expense - Equipment	$3,300
	Accumulated Depreciation - Equipment		$3,300

• Requirement 2

To record sale

Date	Accounts title	Debit	Credit
1 April Year 6	Cash	$105,800
	Accumulated Depreciation - Equipment [$66000 + 3300]	$69,300
	Loss on Sale of Equipment	$36,900
	Equipment		$212,000