Entries for Sale of Fixed Asset Equipment acquired on January 8 at a cost of $16
ID: 2393630 • Letter: E
Question
Entries for Sale of Fixed Asset Equipment acquired on January 8 at a cost of $163,750, has an estimated useful life of 20 years, has an estimated residual value of $9,750, and is depreciated by the straight- line method a. What was the book value of the equipment at December 31 the end of the fourth year? b. Assuming that the equipment was sold on April 1 of the fifth year for 124,555. 1. Journalize the entry to record depreciation for the three months until the sale date. Round your answers to the nerest whole dollar if required Depreciation Expense-Equipment Accumulated Depreciation-Equipment 2. Journalize the entry to record the sale of the equipment. If an amount box does not require an entry, leave it blank. Do not round intermediate calculations. Cash Accumulated Depreciation-Equipment Loss on Sale of Equipment EquipmentExplanation / Answer
Requirement (a) – Book Value of the Equipment at December 31 at the end of 4th Year
Depreciation using straight Line method = [Cost of the Equipment – Residual Value] / Useful Life
= [$163,750 – 9,750] / 20 Years
= $7,700 per year
Total Accumulated Depreciation at the end of 4th Year = $7,700 x 4 = $30,800
Book Value of the Equipment at December 31 at the end of 4th Year
= Cost of the Equipment – Accumulated Depreciation
= $163,750 – 30,800
= $ 132,950
Requirement (b)(1) – Journal Entry to record the Depreciation for 3 months until the sale
Account Titles and Explanation
Debit ($)
Credit ($)
Depreciation Expenses – Equipment A/c
1,925
To Accumulated Depreciation Expenses – Equipment A/c
1,925
Depreciation for 3 months until the sale = $7,700 x 3/12 = $1,925
Requirement (b)(2) – Journal Entry to record the Sale of Equipment
Account Titles and Explanation
Debit ($)
Credit ($)
Cash A/c
124,555
Accumulated Depreciation - Equipment
32,725
Loss on sale of Equipment A/c
6,470
To Equipment A/c
163,750
[Journal Entry to record the sale of Equipment]
Total Accumulated Depreciation
= $30,800 + 1,925
= $32,725
Book Value as on April 1 of the fifth year
= Cost of the Equipment – Accumulated Depreciation
= $ 163,750 - 32,725
= $ 131,025
Sale Proceeds of the Equipment = $124,555
Therefore, Loss on sale of Equipment
= Book Value – sale proceeds
= $ 131,025 – 124,555
= $6,470
Account Titles and Explanation
Debit ($)
Credit ($)
Depreciation Expenses – Equipment A/c
1,925
To Accumulated Depreciation Expenses – Equipment A/c
1,925
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