Barnhart\'s sold a piece of restaurant equipment to another restaurant on July 1

Question

Barnhart's sold a piece of restaurant equipment to another restaurant on July 1, 2013 for $1,100 cash. The equipment originally cost $12,000, had an estimated life of 20 years, and estimated salvage value of $2,000. Barnhart's had recorded total depreciation of $9,000 through the end of 2012, using the straight-line method. Barnhart's had to update the depreciation of the asset before recording the sale. How much additional depreciation expense was recorded for the period of January 1, 2013 through July 1, 2013?

Explanation / Answer

Barnhart's Annual Depreciation (All amounts in $) Cost of Asset 12000 Salvage Value 2000 Depreciable Value 10000 Asset Estimated Life 20 years Depreciation per year 500 per year The asset was sold on July 1, 2013 Hence, depreciation for the period from January 1, 2013 till July 1, 2013 will be half of the annual depreciation charge which is 1/2 of $ 500 or $ 250.

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