Question

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The Brown Company purchased equipment on June 1, 2020.  Assuming the cost of the equipment is $70,000,...

The Brown Company purchased equipment on June 1, 2020.  Assuming the cost of the equipment is $70,000, the residual value is $6,000, a useful life of 4 years and the use of the diminishing balance method using 2 times the straight line rate. The company's year end is December 31.

Round all answers to the nearest dollar.

1) What is depreciation expense for the year ended December 31, 2020? $ Answer

2) What is the depreciation rate (%)?  Answer %

3) What is accumulated depreciation for the year ended December 31, 2022? $ Answer

4) What is the carrying value of the asset for the year ended December 31, 2024? Answer

5) What is depreciation expense for the year ended December 31, 2024? $ Answer

You were asked to prepare the journal entry to record the sale of the above equipment on December 31, 2022.

Is it a gain or loss if the equipment was sold for $10,000?  Answer LOSS or GAIN

How much is the gain or loss? $ Answer

Solutions

Expert Solution

  • Workings

A

Cost

$            70,000.00

B

Residual Value

$              6,000.00

C=A - B

Depreciable base

$            64,000.00

D

Life [in years]

4

E=C/D

Annual SLM depreciation

$            16,000.00

F=E/C

SLM Rate

25.00%

G=F x 2

DDB Rate

50.00%

Year

Beginning Book Value

Depreciation rate

Depreciation expense

Ending Book Value

Accumulated Depreciation

2020

$              70,000.00

50.00%

$         20,416.67

$             49,583.33

$        20,416.67

2021

$              49,583.33

50.00%

$         24,791.67

$             24,791.67

$        45,208.33

2022

$              24,791.67

50.00%

$         12,395.83

$             12,395.83

$        57,604.17

2023

$              12,395.83

$            6396

$                6000

$        64000

  • Requirements

[1] = $ 20417
[2] = 50%
[3] = $ 57,604
[4] = $ 6000 [carrying value = residual value]
[5] = $ 0 [as whole assets have already been depreciated by the year 2023]

[Journal entry]

Date

Accounts title

Debit

Credit

31-Dec-22

Cash

$10,000

Accumulated Depreciation - Equipment

$57,604

Loss on Sale

$2,396

   Equipment

$70,000

Loss = $ 2396

ekkarill92 answered 1 year ago
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