Equipment was acquired at the beginning of the year at a cost of $537,500. The e
ID: 2515602 • Letter: E
Question
Equipment was acquired at the beginning of the year at a cost of $537,500. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of 9 years and an estimated residual value of $47,040.
A. What was the depreciation for the first year? Round your intermediate calculations to 4 decimal places. Round the depreciation for the year to the nearest whole dollar. B. Assuming that the equipment was sold at the end of the second year for $532,597, determine the gain or loss on the sale of the equipment. C. Journalize the entry on Dec. 31 to record the sale. Refer to the Chart of Accounts for exact wording of account titles.Explanation / Answer
Answer
A. Rate of depreciation using straight line method =(Cost of asset / usefule life) / Cost of asset
= (537500 / 9) / 537500*100
= 11.11%
Depreciation under double declining balance method = 11.11 x 200% = 22.22%
depreciation for the first year = 537500 x 22.22%
= $119433
B. The asset is sold at the end of the second year that means the depreciation for the second year would have been charged on it.
Depreciation in second year = (537500-119433) x 12.5% = $52258
Book value of equipment at the end of second year = 537500 - 119433 - 52258 = $365809
Gain on sale of equipment = Sale price - Book value
= 532597- 365809
= $166788
C.
Journalize the entry on Dec. 31 to record the sale:
Date Particulars Dr ($) Cr ($) Dec.31 Cash 532597 Equipment 365809 Gain on sale of equipment 166788Related Questions
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