The ABC Company, located in Boston, purchases a piece o uipment from a dealer in
ID: 2544668 • Letter: T
Question
The ABC Company, located in Boston, purchases a piece o uipment from a dealer in Chicago for $180,000. The cost shipping the equipment, $16,000, wil1 be paid for by ABC The cost of s estimated that the asset wil1 last of its useful equipment arrives it has to be set up and adjusted, at a cost of $4,000. Co. eight years and at the end 1 value of $8,000. When the Recuired Compute the depreciation expense for year one and year two (do each year separately) using 1. Straight-line Double-declining balance This part is independent of parts one and two. Assume that a company purchased an asset for $600,000. At the end of four years the balance in the accumulated depreciation account is $130,000, at which time the asset is sold for $455,000. 3. Required Provide the journal entry for the sale of the asset.Explanation / Answer
3. Calculation of Depreciation Straight Line Method Depreciation = Actual Cost - Residual Value Expected Life Actual Cost of equipment Purchase Cost $ 180,000 Shipping cost $ 16,000 Set up Cost $ 4,000 Actual Cost $ 200,000 Depreciation = 200000 - 8000 8 Depreciation = 24000 per year Double Declining Balance Method Straight Line Depreciation Rate = 1 12.50% 8 Double Declining Depreciation Rate = 12.5% *2 Depreciation Rate = 25% Year 1 Depreciation= 200000 * 25% Depreciation= $ 50,000 Year 2 Depreciation = (Actual Cost - Accumulated Deprreciation) * Depreciation Rate Depreciation = (200000 - 50000) * 25% Depreciation = $ 37,500 Part 3 Journal entry Cash/Bank a/c Dr $ 455,000 Accumulated Dep. a/c Dr $ 130,000 Loss on sale of assets A/c Dr $ 15,000 To Asset A/c $ 600,000 (Being assets of $ 600000 is sold after taking accumulated Dep. Of $ 130000 in $ 455000, and loss on sale of assets $15000 is also recorded.
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