Question

Equipment acquired on January 8 at a cost of $101,130 has an estimated useful life of 13 years, has an estimated residual value of $10,000, and is depreciated by the straight-line method.

a. What was the book value of the equipment at December 31 the end of the fourth year?
$

b. Assume that the equipment was sold on April 1 of the fifth year for $65,197.

1. Journalize the entry to record depreciation for the three months until the sale date. If an amount box does not require an entry, leave it blank. Round your answers to the nearest whole dollar if required.

	Depreciation Expense-Equipment
	Accumulated Depreciation-Equipment

Feedback

2. Journalize the entry to record the sale of the equipment. If an amount box does not require an entry, leave it blank. Do not round intermediate calculations.

	Cash
	Accumulated Depreciation-Equipment
	Loss on Sale of Equipment
	Equipment

Answer 1

Ans:

Depreciation per year as per straight line method = Cost of the asset - Residual Value / Useful life of asset

Depreciation per year on Equipment = $101130 - $10000 / 13 = $7010

(a) Book Value of Equipment as on December 31st at the end of fourth year = Cost - Depreciation for 4 years

= $101130 - ($7010 * 4 years)

= $101130 - $28040

= $73090

Book Value of Equipment as on December 31st at the end of fourth year

$73,090

(b) Equipment was sold on April 1st of fifth year

Depreciation for 3 months (January 1st of fifth year to March 31st of fifth year) = $7010 * 3/12 = $1753 (rounded off to nearest dollar)

Book value as on April 1st of fifth year = Book value as on Dec 31st of fourth year - Depreciation for 3 months

= $73090 - $1753

= $71337

(1) Journal entry for 3 months Depreciation:

Date	Account Name	Debit ($)	Credit ($)
April 1 of fifth year	Depreciation Expense - Equipment	$1753
	Acumulated Depeciation - Equipment		$1753
	(Being Depreciation for 3 months recorded)

(2) Journal entry to record sale of Equipment:

Workings-

Depreciation accumulated up to date of sale = ($7010 * 4 years) + 1753 = $29793

Book Value of Equipment as on date of sale = Cost - accumulated depreciation up to date of sale

$101130 - $29793

= $71337

Sale Proceeds = $65197

Loss on sale of Equipment = Sale proceeds - Book value as on date of sale

= $65197 - $71337

= ($6140)

Date	Account Name	Debit ($)	Credit ($)
April 1 of fifth year	Cash	$65197
	Acumulated Depeciation - Equipment	$29793
	Loss on Sale of Equipment	$6140
	Equipment		$101130
	(Being sale of Equipment recorded)