Question Details: Equipment acquired on January 3, 2005, at a cost of $147,500,h

Question

Question Details:

Equipment acquired on January 3, 2005, at a cost of $147,500,has an estimated useful life of eight years and an estimatedresidual value of $17,500.

Text gave a partial answer - (b) $98,750)

Response Details:

1. Annual depreciation for 2005,2006,2007 using straight -linemethod

       147,500 - 17,500
               8

     = $ 16,250 / yr

                                 Depreciation                            Book value
                  2005          16,250                                    131,250 ( 147,500-16,250)
                  2006          16,250                                    115,000 (131,250-16,250)
                  2007          16,250                                      98,750 ( 115,00 -16,250)


2.Book value of the equipment on Jan1, 2008 is $ 98,750.

3.Assumption - Equipment was sold for $ 95,000
     Accumulated depreciation is 16,250 +16,250+16,250 = $ 48,750.00

        Cash    Dr       95,000
        Acc.Depreciaton  Dr          48,750
        Loss onDisposal    Dr           3,750
              Machinery                                 147,500

Loss is calculated as ( 147,500 -48,750,-95,000)

4. Assumption - Equipment was sold for $ 100,000

       Cash                       Dr             100,000
        Acc.Depreciation    Dr               48,750
Gain on sale       1,250
   Machinery       147,500

QUESTION:

What does the “Dr” mean?

Explanation / Answer

Dr is debit ; meaning those journals are debited and the oneswithout Dr is credited .

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