Equipment was acquired at the beginning of the year at a cost of $79,440. The eq

Question

Equipment was acquired at the beginning of the year at a cost of $79,440. The equipment was depreciated using the straight-line method based on an estimated useful life of six years and an estimated residual value of $7,500.

Required:

Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

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(a) What was the depreciation expense for the first year? (b) Assuming the equipment was sold at the end of the second year for $59,897, 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.

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JOURNAL

DATE DESCRIPTION POST. REF. DEBIT CREDIT

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Explanation / Answer

a Depreciation expense for the first year = (79440-7500)/6= 11990 b Book value at the end of second year = 79440-(11990*2)= 55460 Gain on sale = 59897-55460= 4437 c Cash 59897 Accumulated depreication-Equipment 23980          Equipment 79440          Gain on sale 4437

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