Equipment acquired on January 6, 2011, at a cost of $714,000, has an estimated useful life of 12 years and an estimated residual value of $44,400.a. What was the annual amount of depreciation for the years 2011, 2012, and 2013, using the straight-line method of depreciation?b. What was the book value of the equipment on January 1, 2014?c. Assuming that the equipment was sold on January 3, 2014, for $525,000, journalize the entry to record the sale.d. Assuming that the equipment had been sold on January 3, 2014, for $560,000 instead of $525,000, journalize the entry to record the sale.Answer:
a. 2011 depreciation expense: $55,800 [($714,000 – $44,400) ÷ 12]2012 depreciation expense: $55,8002013 depreciation expense: $55,800b. $546,600 [$714,000 – ($55,800 × 3)]c. Cash 525,000Accumulated Depreciation—Equipment 167,400Loss on Sale of Equipment 21,600Equipment 714,000d. Cash 560,000Accumulated Depreciation—Equipment 167,400Equipment 714,000Gain on Sale of Equipment 13,400
Equipment acquired on January 8, 2011, at a cost of $420,000, has an estimated useful life of 15 years, has an estimated residual value of $30,000, and is depreciated by the straight-line method.a. What was the book value of the equipment at December 31, 2014, the end of the year?b. Assuming that the equipment was sold on October 1, 2015, for $275,000, journalize the entries to record (1) depreciation for the nine months until the sale date, and (2) the sale of the equipment.Answer:
a. Cost of equipment……………………………………………………………………………… $420,000Accumulated depreciation at December 31, 2014(4 years at $26,000* per year)……………………………………………………………… 104,000Book value at December 31, 2014…………………………………………………………… $316,000* ($420,000 – $30,000) ÷ 15 = $26,000b. (1) Depreciation Expense—Equipment 19,500Accumulated Depreciation—Equipment 19,500Equipment depreciation ($26,000 × 9/12 = $19,500).(2) Cash 275,000Accumulated Depreciation—Equipment* 123,500Loss on Sale of Equipment 21,500Equipment 420,000* $104,000 + $19,500 = $123,500
