Equipment was acquired at the beginning of the year at a cost of $76,020. The eq

Question

Equipment was acquired at the beginning of the year at a cost of $76,020. The equipment was depreciated using the straight-line method based on an estimated useful lite of sx years and an estimated residual value of $7,800. Required: (a) What was the depreciation expense for the first year? (b) Assuming the equipment was sold at the end of the second year for $57,542, determine the gain or loss on sale of the equipment (c) Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account tites

Explanation / Answer

1) Depreciation expense = [76020 - 7800] / 6

= 68220 / 6

= $11370 per year

2) Book value at 2nd year = 76020 - 11370

= $64650

Gain / (loss) on sale of equipment = sales value - book value

= $57542 - $64650

= ($7108) loss

3

Date Accounts Dr Cr 2nd year Cash 57542 Loss on sale of equipment 7108 Accumulated Depreciation on equipment 11370 To Equipment 76020

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