Question

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

Answer 1

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