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The Orange Company purchased equipment on June 1, 2020. Assuming the cost of the equipment is...

The Orange 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 How much is the gain or loss? $ Answer

Solutions

Expert Solution

Purchase Date: 01.06.2020
Cost of Equipment : 70000
Residual Value: 6000
Useful Life: 4 Years
Method Of Depreciatin : Double Diminishing Method.
Financial Year Closure: 31-Dec
1) Depreciation Expenses :
Period No. of Month Opening Value Depreciation for the Year Accumulated Depreciation Carrying Value
2020 7 70000 20417 20417 49583
2) Depreciation Rate:
Depreciation Rate = 1 / Useful life X 2 = 1/4 X 2 = 50%
3) Accumulated Depreciation:
Highlighted in Green
Period No. of Month Opening Value Depreciation for the Year Accumulated Depreciation Carrying Value
2020 7 70000 20417 20417 49583
2021 12 49583 24792 45208 24792
2022 12 24792 12396 57604 12396
4) Carrying Value as on Decemebr 2024
Highlighted in Blue
Period No. of Month Opening Value Depreciation for the Year Accumulated Depreciation Carrying Value
2020 7 70000 20417 20417 49583
2021 12 49583 24792 45208 24792
2022 12 24792 12396 57604 12396
2023 12 12396 6198 63802 6198
2024 5 6198 198 64000 6000
5) Journal Entry for Sale of Equipment on Decemebr 2022 at 10000$
Carrying Value as on Decemebr 2022: 12396
Sale Value : 10000
Net Gain on Sale 2396

JOurnal Entry for Sale of Equipment:

Cash / BAnk A/c Dr. 10000

Profit and Loss ( Gain ) A/c Dr. 2396

To Asset A/c Cr. 12396

ekkarill92 answered 1 year ago
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