Question
In: Accounting
Equipment was acquired at the beginning of the year at a cost of $40,000. The equipment...
Equipment was acquired at the beginning of the year at a cost of $40,000. 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 $780. a. What was the depreciation for the first year?
b. Assuming the equipment was sold at the end of year 2 for $9,240, determine the gain or loss on the sale of the equipment. $fill in the blank
c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
Solutions
Expert Solution
- Workings
|
A |
Cost |
$ 40,000.00 |
|
B |
Residual Value |
$ 780.00 |
|
C=A - B |
Depreciable base |
$ 39,220.00 |
|
D |
Life [in years] |
10 |
|
E=C/D |
Annual SLM depreciation |
$ 3,922.00 |
|
F=E/C |
SLM Rate |
10.00% |
|
G=F x 2 |
DDB Rate |
20.00% |
|
Year |
Beginning Book Value |
Depreciation rate |
Depreciation expense |
Ending Book Value |
Accumulated Depreciation |
|
1 |
$ 40,000.00 |
20.00% |
$ 8,000.00 |
$ 32,000.00 |
$ 8,000.00 |
|
2 |
$ 32,000.00 |
20.00% |
$ 6,400.00 |
$ 25,600.00 |
$ 14,400.00 |
- Requirements
[a] Depreciation for Year 1 = $ 8000
[b]
Ending Book value at end of Year 2 = $ 25600
Sold for $ 9240
Hence,
LOSS on sale of Equipment = $ 25600 – 9240 = $ 16,360 [enter as
negative if required]
[c]
|
Date |
Accounts title & Explanation |
Debit |
Credit |
|
Year 2 |
Cash |
$ 9,240.00 |
|
|
Accumulated Depreication |
$ 14,400.00 |
||
|
Loss on Asset disposal |
$ 16,360.00 |
||
|
Equipment |
$ 40,000.00 |
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