Question

Disposal of Fixed Asset

Equipment acquired on January 6 at a cost of $353,300 has an estimated useful life of 8 years and an estimated residual value of $46,100.

a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation?

Year	Depreciation Expense
Year 1	$
Year 2	$
Year 3	$

b. What was the book value of the equipment on January 1 of Year 4?
$

c. Assuming that the equipment was sold on January 3 of Year 4 for $226,200, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Jan. 3	Cash
	Accumulated Depreciation-Equipment
	Loss on Sale of Equipment
	Equipment

d. Assuming that the equipment had been sold on January 3 of Year 4 for $242,900 instead of $226,200, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Jan. 3	Cash
	Accumulated Depreciation-Equipment
	Equipment
	Gain on Sale of Equipment

Answer 1

a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation?

Year	Depreciation Expense
Year 1	$353300-46100/8 = 38400
Year 2	$38400
Year 3	$38400

b. What was the book value of the equipment on January 1 of Year 4?
$353300-(38400*3) = 238100

c. Assuming that the equipment was sold on January 3 of Year 4 for $226,200, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Jan. 3	Cash	226200
	Accumulated Depreciation-Equipment	115200
	Loss on Sale of Equipment	11900
	Equipment		353300

d. Assuming that the equipment had been sold on January 3 of Year 4 for $242,900 instead of $226,200, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Jan. 3	Cash	242900
	Accumulated Depreciation-Equipment	115200
	Equipment		353300
	Gain on Sale of Equipment		4800