Equipment acquired in jan 3 2007, at a cost of 265,500 has estimated useful life

Question

Equipment acquired in jan 3 2007, at a cost of 265,500 has estimated useful life of 8 years and an estimated Residual value 31,500.
a. what was the annual amount of depriciation for they years 07,08, 09, using the
straightline method of depr.
b. what was the book value of the equip. on Jan 1, 2010
c. assuming that the equipment was sold on jan 4 2010 for 168,500 calculate gain or loss
d.assuming that the equipment was sold on jan 4, 2010 for 180,000 instead of 168,500 calculate gain or loss.

THANKS

Explanation / Answer

a. straight line depreciation = (265,500 - 31,500)/8 = $29,250 per year. This is the amount of depreciation for each year, 2007 to 2009. The total for all three years is 29,250*3 = $87,750. b. book value = 265,500 - 87,750 = $177,750 c. 168,500 - 177,750 = -9250, a loss of 9250 d. 180,000 - 177,750 = 2250, a gain of 2250

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