Equipment was acquired at the beginning of the year at a cost of $650,000. The e

Question

Equipment was acquired at the beginning of the year at a cost of $650,000. The equipment was depreciated using the straight-line method based on an estimated useful life of 9 years and an estimated residual value of $48,685.

a. What was the depreciation for the first year? Round your intermediate calculations to 4 decimal places. Round your answer to the nearest cent.
$

b. Assuming the equipment was sold at the end of the eighth year for $643,445, determine the gain or loss on the sale of the equipment. Round your answer to the nearest cent.
$

c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank. Round your answers to the nearest cent.

Explanation / Answer

a.Depreciation=(Cost-Salvage value)/Useful life

=(650,000-48685)/9=$66812.78

2.Book value as on date of sales=650,000-(66812.78*8)=$115,497.78(Approx)

Hence gain =(643445-115497.78)=$527947.22(Approx)

c.Cash a/c..Dr$643445

Accumulated depreciation a/c..Dr$534,502.22

To equipment $650,000

To gain on sales $527947.22

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