Question

Use the following information to answer the next two questions:

On January 2, 2004, Shady Corp. acquired equipment for $110,000. The estimated life of the equipment is 5 years, the estimated residual value is $10,000 and Shady Corp. uses the straight-line method for computing depreciation expense. On June 30^th of 2006 (2 and ½ years after acquiring the asset), Shady Corp sold the equipment for $50,000.

What two journals entries were made on June 30^th, 2006, on the date the asset was sold? directly below.

1. The first (adjusting) entry recorded on June 30th, 2006 was:

Provide answer towards the bottom of the answer sheet

2. The second entry to record the equipment sale on June 30th, 2006 was:

            Provide answer towards the bottom of the answer sheet

Answer 1

	Summarised the data given in the question
	Acquired cost - $110,000
	Estimated residual value = $10,000
	Life of equipment - 5 years
	Method of Depreciation - Straight line
	Annual Depreciation = Cost of Acquzition - Residual Value
	Life of Equipment
	= 110,000 - 10,000
	5
	=     100,000
	5
	= 20,000
Date	Particulars	Amount($)
02-01-04	Cost of acquzition	110,000.00
	Less: Depreciation	20,000.00
01-01-05	Written down value	90,000.00
	Less: Depreciation	20,000.00
01-01-06	Written down value	70,000.00
	Less: Depreciation half year	10,000.00
30-06-06	Written down value	60,000.00
1	The first adjustment entry recorded on 30th June, 2006
	Accumulated Depreciation A/c       DR	50,000.00
	To, Equipment A/c		50,000.00
	(Accumulated depreciation during 2 and half year charged in assets)
2	The second entry to record the equipment sale on June 30th, 2006.
	Bank A/c                                       DR	50,000.00
	Loss on Sell of Equipment A/c        DR	10,000.00
	To, Equipment A/c		60,000.00
	(Equipement sold on loss)