Equipment was acquired at the beginning of the year at a cost of $456,970. The e

Question

Equipment was acquired at the beginning of the year at a cost of $456,970. The equipment was depreciated using the straight-line method based on an estimated useful life of 14 years and an estimated residual value of $46,070. Required: A. What was the depreciation for the first year? B. Assuming the equipment was sold at the end of the tenth year for $157,130, determine the gain or loss on the sale of the equipment. C. Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles.

Explanation / Answer

A)

Depreciation under straight line method = Cost of the asset – Residual value/Number useful years of life

= $456,970 - $46,070/14 years

= $410,900/14 year

= $29,350

First year depreciation is $29,350.

B)

C)

Journal entry:

Note: Chart of accounts is not available.

Particulars Amount ($) Cost of equipment 456,970 Less: Accumulated depreciation for 10 years ($29,350*10) 293,500 Book value at the end of 10th year 163,470 Sold value 157,130 Loss on sale of equipment ($163,470 - $157,130) 6,340

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