PE 10-6A; Sales of equipment Equipment was acquired at the beginning of the year

Question

PE 10-6A; Sales of equipment Equipment was acquired at the beginning of the year at a cost of $215,000. The equipment was depreciated using the straight line method based on an estimated useful life of 18 years and an estimated value of $39,500. A. What was the depreciation for the first year? B. Assuming the equipment was sold at the end of the eighth year for $128,000, determine the gain or loss on the sale of the equipment. C. Journalize the entry to record the sale. Straight-line and double-line 5 years

Explanation / Answer

A. (215,000 - 39,500)/18 = 9750 answr: $9750 B. At end of eighth year, accumulated depreciation = 9750*8 = 78,000 book value = 215,000 - 78,000 = 137,000 Since equipment was sold for less than book value, it was sold at a loss. Loss = 137,000 - 128,000 = 9,000 answr: Loss of $9,000 C. Debit: Cash 128,000 Debit: Accumulated depreciation, equipment 78,000 Debit: Loss on sale of equipment 9,000 Credit: Equipment 215,000

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