Question

In: Accounting

Office equipment was purchased on January 2, 2006 for $170,000, with an estimated life of 8...

Office equipment was purchased on January 2, 2006 for $170,000, with an estimated life of 8 years and a residual value of $10,000. It is sold on June 30, 2012 for $60,000 cash. (Assume all appropriate entries for depreciation had been made for the first six years of use - 2006 through 2011, but not for the half year in 2012.) Journalize the following entries:

(a) Journalize the depreciation for the one-half year prior to the sale, using the straight-line method.           

(b) Journalize the sale of the equipment.

Format: Use the Chart of Accounts to enter correct account name. Enter debits and credits as whole numbers WITH COMMAS, but NO DECIMALS OR DOLLAR SIGNS!

Date

Account Name

Debit

Credit

June 30

  

  

Solutions

Expert Solution

Straight line depreciation

= ( cost – Residual value ) / useful life of the asset

= ( 170000 - 10000 ) / 8

= $ 20000 per year

For half year = 20000/2

= $ 10000

Depreciation provided for 6.5 years ( from 2006 - 2012 ) = 6.5 * 20000

= $ 130000

Accumulated Depreciation = $ 130000 ( at the time of Sale )

a)

Date Accounts Name Debit Credit
a
12/31/2011 Depreciation 20000
              Accumulated Depreciation 20000
6/30/2012 Depreciation 10000
              Accumulated Depreciation 10000

b)

Date Accounts Name Debit Credit
b) Sale of asset
            Cash 60000
Accumulated depreciation 130000
Asset 170000
                   gain on Asset disposal 20000

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