Sale of Equipment Equipment was acquired at the beginning of the year at a cost

Question

Sale of Equipment Equipment was acquired at the beginning of the year at a cost of $550,000. The equipment was depreciated using the straight-line method based on an estimated useful life of 9 years and an estimated residual value of $42,055 a. What was the depreclation for the first year? Round your answer to the nearest cent. b. Using the rounded amount from Part a in your computation, determine the gain(loss) on the sale of the equipment, assuming it was sold at the end of year eight for $93,618. Round your answer to the nearest cent and enter as a positive amount. c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank. Round your answers to the nearest cent.

Explanation / Answer

a) Depreciation for the first year = (550000-42055)/9 = 56438.33 per year

b) Accumlated depreciation = 56438.33*8 = 451506.67

Book value at the end of 8 year = 550000-451506.67 = 98493.33

Sale value = 93618

Loss on sale = 98493.33-93619 = 4875.33

c) Journal entry :

Date account & explanation debit credit Cash 93618 Accumlate depreciation 451506.67 Loss on sale of equipment 4875.33 Equipment 550000 (To record sale of equipment)

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