Equipment acquired on January 8, 2013, at a cost of $140,000, I has an estimated
ID: 2478068 • Letter: E
Question
Equipment acquired on January 8, 2013, at a cost of $140,000, I has an estimated useful life of 16 years, has an estimated 1 residual value of $8,000, and is depreciated by the I I straight-line method. Required: A. What was the book value of the equipment at December 31, 2016, the end of the year? B. Assuming that the equipment was sold on July 1, 2017, for $96,700, journalize the entries to record (1) depreciation for the six months until the sale date, and (2) the sale of the equipment. Refer to the Chart of Accounts for exact wording of account titles.Explanation / Answer
Cost of the equipment 140000 Residual value 8000 useful life 16 years depriciation pa SLM ( 140000 - 8000)/16 = 8250 A) Depriciation for 4 years ( 2013 to 2016) = 8250 * 4 = 33000 Book Value as on Dec 31 2016 = Cost of the equipment - Depriciation for 4 years = 140000 - 33000 = 107000 B) Depriciation for 6 months 1st January 2017 to 1st July 2017 ( 6 months) = 8250 / 2 = 4125 Depriciation till 1st July 2017 = 33000 + 4125 = 37125 Cost 140000 WDV ( 140000 - 37125) 102875 Sale price 96700 Loss on sale of equipment 6175 1) Depriciation expense Dr 4125 Accumulated depriciation Cr 4125 ( to record depriciation for 6 months) 2) Cash Dr 96700 Loss on equipment Dr 6175 Accumulated depriciation Dr 37125 Equipment Cr 140000 ( To record sale of equipment)
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