Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to...

Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the equipment is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include a:
Select one:
a. Credit to loss on sale for $10,000.
b. Credit to cash for $20,000.
c. Debit to accumulated depreciation for $22,500.
d. Debit to loss on sale for $10,000.

Solutions

Expert Solution

Depreciation expense = $45,000 - 5,000 / 8 = $5,000 per year

Accumulated depreciation for 4.5 years = $5,000*4.5 = $22,500

Book value of equipment as on July 1, Year 5 = $45,000 - 22,500 = $22,500

Loss on sale of equipment = $22,500 - 20,000 = $2,500

General Journal	Debit	Credit
Cash	$20,000
Accumulated depreciation	22,500
Loss on sale	2,500
Equipment		$45,000

Hence option c is correct.

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to...

Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the equipment is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include a: A) Credit to loss on sale for $10,000. B) Debit to loss on sale for $10,000. C) Credit to cash for $20,000. D) Debit...

Company purchased equipment costing $239,000 on January 1, 2022. The equipment was assigned an estimated useful...

Company purchased equipment costing $239,000 on January 1, 2022. The equipment was assigned an estimated useful life of six years and an estimated salvage value of $8,000. The equipment was to be depreciated using the sum-of-the-years-digits' depreciation method. On January 1, 2025, Company revised the life of the equipment from six to thirteen years. Calculate the amount of depreciation expense recorded on the equipment for 2025.

Bebtley Co. purchased equipment on January 1, 2017, at a cost of $45,000. Depreciation for 2017...

Bebtley Co. purchased equipment on January 1, 2017, at a cost of $45,000. Depreciation for 2017 and 2018 was based on an estimated eight-year life and $3,000 estimated residual value. The company uses the straight-line method of depreciation and records any partial-year depreciation based on the number of months the asset is in service. In 2019, Bentley Co. revised its depreciation estimate and now believes the equipment will have a total service life of six years & a residual value...

Fellingham Corporation purchased equipment on January 1, 2019, for $236,000. The company estimated the equipment would...

Fellingham Corporation purchased equipment on January 1, 2019, for $236,000. The company estimated the equipment would have a useful life of 10 years with a $19,200 residual value. Fellingham uses the straight-line depreciation method. Early in 2021, Fellingham reassessed the equipment's condition and determined that its total useful life would be only six years in total and that it would have no salvage value. How much would Fellingham report as depreciation on this equipment for 2021? Multiple Choice $32,107. $65,160....

Fellingham Corporation purchased equipment on January 1, 2016, for $240,000. The company estimated the equipment would...

Fellingham Corporation purchased equipment on January 1, 2016, for $240,000. The company estimated the equipment would have a useful life of 10 years with a $40,000 residual value. Fellingham uses the straight-line depreciation method. Early in 2019, Fellingham reassessed the equipment's condition and determined that its total useful life would be only eight years in total and that it would have a $20,000 residual value. How much would Fellingham report as depreciation on this equipment for 2019? a) 36,000 b)...

13) Lorenzo Corporation purchased equipment on January 1, 2019 for $600,000. The equipment had an estimated...

13) Lorenzo Corporation purchased equipment on January 1, 2019 for $600,000. The equipment had an estimated useful life of 5 years and an estimated salvage value of $60,000. After using the equipment for 2 years, the company determined that the equipment could be used for an additional 6 years and have a salvage value of $8,000. Assuming Lorenzo Corporation uses straight-line depreciation, compute depreciation expense for the year ending December 31, 2021. (Round your final answer to the nearest dollar.)...

On January 1, Year 1, Dinwiddie Company purchased a car that cost $45,000. The car has...

On January 1, Year 1, Dinwiddie Company purchased a car that cost $45,000. The car has an expected useful life of 5 years and a $10,000 salvage value. Which of the following statements is true? a)The total amount of depreciation expense recognized over the five-year useful life will be greater under the double-declining-balance method than the straight-line method. b)The amount of depreciation expense recognized in Year 4 would be greater if Dinwiddie depreciates the car under the straight-line method than...

On January 1, 2016, Sunland Corporation acquired equipment costing $73,280. It was estimated at that time...

On January 1, 2016, Sunland Corporation acquired equipment costing $73,280. It was estimated at that time that the equipment would have a useful life of eight years and no residual value. The company uses the straight-line method of depreciation for its equipment, and its year end is December 31. 1. Calculate the equipment’s accumulated depreciation and carrying amount at the beginning of 2018. ---Equipment’s accumulated depreciation = ----Carrying amount= 2.What is the amount of the gain or loss that would...

ABC company purchased equipment on January 1, 2015, for $50,000, with an estimated useful life of...

ABC company purchased equipment on January 1, 2015, for $50,000, with an estimated useful life of 5 years and an estimated residual value of $5,000. Assume the equipment was sold on April 30th 2017 for $25,000 Prepare journal entries for the following: A) Calculate depreciation expense for 2015 and 2016 using straight line method of depreciation. Prepare the journal entry to record depreciation B) Calculate depreciation for 2017 and record the journal entry C) Prepare the journal entry for the...

Balls & Bats, Inc. purchased equipment on January 1, 2005 at a cost of $100,000. Estimated...

Balls & Bats, Inc. purchased equipment on January 1, 2005 at a cost of $100,000. Estimated useful life is 4 years with a salvage value of $10,000. 1. Prepare two different depreciation schedules for the equipment, one using double-declining balance method and the other using the straight line method. 2. Which method would result in the greatest net income for the year ending Dec 31, 2005 3. How would taxes affect management's choice between these two methods for the financial...

Subjects