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 $34,250. The equipment was depreciated using the double-declining balance method based on an estimated useful life of five years and an estimated residual value of $670. What was the depreciation for the first year? Assuming the equipment was sold at the end of year 3 for $7,840, determine the gain or loss on the sale of the equipment. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Explanation / Answer

Answering part B as asked Statement showing computations Particulars Amount Cost of Equipment        34,250.00 Residual Value              670.00 Life in years                   5.00 Depreciation = `1/5 *2 40.00% Particulars Year 1 Year2 Year3 Opening Balance        34,250.00           20,550.00                           12,330.00 Depreciation@40%        13,700.00             8,220.00                              4,932.00 Closing balance        20,550.00           12,330.00                              7,398.00 Book Value at end of 3rd Year is          7,398.00 Sale Value          7,840.00 Gain on sale of Equipment =7840 - 7398              442.00

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