Question

On January 1, 2016, Sunland Corporation acquired equipment costing $73,280. It was estimated at that time that the equipment would have a useful life of eight years and no residual value. The company uses the straight-line method of depreciation for its equipment, and its year end is December 31.

1. Calculate the equipment’s accumulated depreciation and carrying amount at the beginning of 2018.

---Equipment’s accumulated depreciation =

----Carrying amount=

2.What is the amount of the gain or loss that would arise when a quarter of the equipment was sold on January 1, 2018, for cash proceeds of $19,760?

gain / loss ? from sale of equipment =?

3. What is the depreciation expense for January 1, 2018, to October 31, 2018? Depreciation expense=

4.On November 1, 2018, the company purchased additional equipment for $9,600 that also had a useful life of eight years and no residual value. What is the depreciation for the two months ending December 31, 2018? Total depreciation for 2 months=

5. On December 31, 2018, the company sold some equipment for a loss of $3,020. After recording the sale, the balances in the Equipment account and Accumulated Depreciation account were $52,760 and $14,418, respectively. Based on this information, what were the proceeds received when this equipment was sold?

Cash proceeds from sale =

Answer 1

1. Calculate the equipment’s accumulated depreciation and carrying amount at the beginning of 2018.

Equipment’s accumulated depreciation = (73280/8)*2 = 18320

Carrying amount = 73280-18320 = 54960

2.What is the amount of the gain or loss that would arise when a quarter of the equipment was sold on January 1, 2018, for cash proceeds of $19,760?

gain / loss ? from sale of equipment = 19760-54960 = Loss from the sale of equipment = 35200

3. What is the depreciation expense for January 1, 2018, to October 31, 2018?

Depreciation expense= 73280/8*10/12 = $7633

4.On November 1, 2018, the company purchased additional equipment for $9,600 that also had a useful life of eight years and no residual value. What is the depreciation for the two months ending December 31, 2018?

Total depreciation for 2 months= 73280/8*2/12+9600/8*2/12 = $1727

5. On December 31, 2018, the company sold some equipment for a loss of $3,020. After recording the sale, the balances in the Equipment account and Accumulated Depreciation account were $52,760 and $14,418, respectively. Based on this information, what were the proceeds received when this equipment was sold?

Book value of equipment = 52760-14418 = 38342

Sale proceeds = 38342-3020 = $35322