Equipment was acquired at the beginning of the year at a cost of $76,020. The eq
ID: 2568787 • Letter: E
Question
Equipment was acquired at the beginning of the year at a cost of $76,020. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,800.
Required:
Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles. There should be five rows in this Journal.
Chart of accounts...
(a) What was the depreciation expense for the first year? (b) Assuming the equipment was sold at the end of the second year for $57,542, determine the gain or loss on sale of the equipment. (c)Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles. There should be five rows in this Journal.
Chart of accounts...
ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 114 Interest Receivable 115 Notes Receivable 116 Merchandise Inventory 117 Supplies 119 Prepaid Insurance 120 Land 121 Equipment 122 Accumulated Depreciation 132 Goodwill 133 Patents LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary REVENUE 410 Sales 610 Interest Revenue 620 Gain on Sale Equipment EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Supplies Expense 523 Delivery Expense 524 Rent Expense 525 Insurance Expense 531 Repairs and Maintenance Expense 541 Depreciation Expense 543 Depletion Expense 544 Amortization Expense-Patents 591 Miscellaneous Expense 710 Interest Expense 720 Loss on Sale of EquipmentExplanation / Answer
a) What was the depreciation expense for the first year
Straight line depreciation = (Original cost-salvage value)/useful life
= (76020-7800)/6
Straight line depreciation = 11370
First year depreciation = 11370
Assuming the equipment was sold at the end of the second year for $57,542, determine the gain or loss on sale of the equipment.
Accumlated depreciation for two year = 11370*2 = 22740
Book value at the end of second year = (76020-22740) = 53280
Gain on sale of equipment = (57542-53280) = 4262
Journalize the entry to record the sale.
(b)Assuming the equipment was sold at the end of the second year for $57,542, determine the gain or loss on sale of the equipment.
Accumlated depreciation for two year = 11370*2 = 22740
Book value at the end of second year = (76020-22740) = 53280
Gain on sale of equipment = (57542-53280) = 4262
(c)Journalize the entry to record the sale.
date accounts & Explanation debit credit Cash a/c 57542 Accumlated depreciation (11370*2) 22740 Gain on sale equipment 4262 Equipment a/c 76020 (To record sale of equipment)Related Questions
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