Equipment acquired on January 6 at a cost of $375,000 has an estimated useful li
ID: 2566185 • Letter: E
Question
Equipment acquired on January 6 at a cost of $375,000 has an estimated useful life of 20 years and an estimated residual value of $25,000.
a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation?
b. What was the book value of the equipment on January 1 of Year 4?
$
c. Assuming that the equipment was sold on January 3 of Year 4 for $300,000, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
d. Assuming that the equipment had been sold on January 3 of Year 4 for $325,000 instead of $300,000, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
Year Depreciation Expense Year 1 $ Year 2 $ Year 3 $Explanation / Answer
a)Depreciation=(cost-salvage value)/years
=(375000-25000)/20
=17500
Year 1=17500
Year 2=17500
Year 3=17500
b) Book value on year 4= 375000-(3*17500)=322500
c) There is loss and it is =322500-300000=22500
cash(db)300000
Accumulated depreciation (db) 52500
Loss on sale of asset (db) 22500
Asset(cr) 375000
d)Here there is gain and it is 325000-322500=2500
cash(db)325000
Accumulated depreciation (db) 52500
Gain on sale of asset (cr) 2500
Asset(cr) 375000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.