question archive Sale of Equipment Equipment was acquired at the beginning of the year at a cost of $37,500
Sale of Equipment Equipment was acquired at the beginning of the year at a cost of $37,500
Subject:AccountingPrice:2.87 Bought7
Sale of Equipment Equipment was acquired at the beginning of the year at a cost of $37,500. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of ten years and an estimated residual value of $730.
a. What was the depreciation for the first year? $
b. Assuming the equipment was sold at the end of year 2 for $9,230, determine the gain or loss on the sale of the equipment. $
C. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer:
Double declining balance method rate = Straight line rate*2
Straight line rate = 100/ 10
= 10%
Double declining balance method rate = 10% * 2
= 20%
1st year depreciation expense = Cost * 20%
= $37,500 * 20%
= $7,500
2nd year depreciation expense = ($37,500 - $7,500) * 20%
= $6,000
Book value at the end of 2nd year = $37,500 - $7,500 - $6,000
= $24,000
a.
Depreciation expense for the first year = $7,500
b.
Loss on the sale of equipment = Book value - Sales value
= $24,000 - $9,230
= $14,770
c.
| Cash | $9,230 | |
| Accumulated Depreciation - Equipmemt ($7,500 + $6,000) | $13,500 | |
| Loss on sale of Equipment | $14,770 | |
| ... Gain on sale of equipment | $37,500 | |
| (To record the depreciation expense) |
