Question
In: Accounting
Sale of Equipment Equipment was acquired at the beginning of the year at a cost of...
Sale of Equipment
Equipment was acquired at the beginning of the year at a cost of $29,500. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of ten years and an estimated residual value of $570.
a. What was the depreciation for the first
year?
$
b. Assuming the equipment was sold at the end
of year 2 for $6,820, determine the gain or loss on the sale of the
equipment.
$
c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
Solutions
Expert Solution
Answer:-a)-The double-declining-balance depreciation for the first year=$5900
b)Loss on sale of equipment =Sale value of equipment- Book value of equipment
= $6820-$18880
= -$12060
c)-Journal entry:-
| Date | General Journal | Debit | Credit | ||
| Year 2 | Cash | 6820 | |||
| Accumulated depreciation | 10620 | ||||
| Loss on sale of asset | 12060 | ||||
| Cost of Equipment | 29500 | ||||
|
|
Explanation:- Double Declining balance depreciation is calculated using the following formula:
Depreciation rate is given by the following formula:
Straight-line Depreciation Rate = 1/10 = 0.10 = 10% Depreciation for first year = ($29500 *20%) = $5900 Book value at the end of first year= $29500-$5900 =$23600 Depreciation for second year = ($23600 *20%) = $4720 |
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