Question
In: Accounting
Equipment acquired on January 4, 2013, at a cost of $140,000, has an estimated useful life...
Equipment acquired on January 4, 2013, at a cost of $140,000, has an estimated useful life of 16 years, has an estimated residual value of $8,000, and is depreciated by the straight-line method.
Blank 1: What is the book value of the equipment at December 31, 2016, the end of the year? (Hint: pay close attention to the dates.)
Blank 2: Assume that the equipment was sold on July 1, 2017, for $96,700. Enter the amount of any gain or loss on the sale of equipment.
Enter your answer as a number only - no punctuation ($ , .). For example, if your answer is 115,000, enter 115000 in the blank.
| Blank # 1 | |
| Blank # 2 |
Solutions
Expert Solution
| Calculation of book value of equipment | ||||
| Depreciation per year | (Cost - Residual value)/Estimated useful life | |||
| Depreciation per year | (140000-8000)/16 | |||
| Depreciation per year | $8,250 | |||
| Accumulated depreciation up to 4 years | 8250*4 | |||
| Accumulated depreciation up to 4 years | $33,000 | |||
| Book value of equipment at 31st Dec 2016 | Cost - Accumulated depreciation | |||
| Book value of equipment at 31st Dec 2016 | 140000-33000 | |||
| Book value of equipment at 31st Dec 2016 | $107,000 | |||
| Depreciation for 6 months | (8250*6/12) | |||
| Depreciation for 6 months | $4,125 | |||
| Book value of asset as on 01st July 2017 | 107000-4125 | |||
| Book value of asset as on 01st July 2017 | $102,875 | |||
| Gain (loss) on sale of equipment | Sale proceeds - Book value | |||
| Gain (loss) on sale of equipment | 96700-102875 | |||
| Gain (loss) on sale of equipment | -$6,175 | |||
| Thus, loss on sale of equipement is $6,175 | ||||
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