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

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: $55,800
2013 depreciation expense: $55,800
b. $546,600 [$714,000 – ($55,800 × 3)]
c.
 Cash 525,000
Accumulated Depreciation—Equipment 167,400
Loss on Sale of Equipment 21,600
Equipment 714,000
d.
 Cash 560,000
Accumulated Depreciation—Equipment 167,400
Equipment 714,000
Gain on Sale of Equipment 13,400