Question

Instructions Analysis Equipment was acquired at the beginning of the year at a cost of $74,660. The equipment was depreciated using the straight-line method based on an estimated useful life of six years and an estimated residual value of $7,920. What was the depreciation oxpanse for me first year? Assuming the squaman was sold at the end of the second year for $59,496, determine the grain orkass on sale of the Aquamant. Required: (a) What was the depreciation expense for me fust year? (6) Assuming the equipment was sold at the end of me second year for $59.486. determine the gain or loss on sale of the aquant. (a) Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account miles. Chart of Accounts CHART OF ACCOUNTS General Ledger General Journal REVENUE 410 Sales 610 Interest Revenue 620 Gain on Sale of Equipment Joumalize the entry to record the sale on December 31. Refer to the Chart of Accounts for exact wording of accountries. PAGE 1 ASSETS 110 Cash 111 Pally 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 Goodwil 133 Palents JOURNAL DATE DESCRIPTION POST. REF. DEBIT CREDIT EXPENSES 510 Cost of Merchandise Sold 620 Salaries Expense 521 Advertising Expense 522 Supplies Expense 523 Dellvery Expense 524 Rent Expense 525 Insurance Expense 531 Repairs and Maintenance Expense 541 Depreciation Expense 543 Depletion Experse 544 Amortization Expense Patents 591 Miscelaneous Experise 710 Interest Expense 720 Loss on Sale of Equipment LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary

Answer 1

Cost of Equipment = 78,660 Residual value = 7920 Life (useful) = 6years Depreciation (under sim) per year [ti = cost of Equipment - Residual Vallie life of Assest teenused 78660 - 7920 rece ht AN & 11790 per year (b) Gain I loss on sale of Equipment. Equipment sold at end of Second year. So, we need to calculate depreciation for Two years. Depreciation = ( 73660-7920) x2 = 11790X2 = 23580. Book value of Assest (equipment) at the end of 2nd year is. Cost of Equipment - bepreciation for Two yeus = 78660 -23580 55080

Book value of Equipment at end of year's is $55,080 cale price = $59,486.. since, Sale price is greater than Book value Then, There will be Gain of$ 4406 Gain = sale price - Book Value = $59486- 55080] $ 4406 (C) Journal Entry for sale of Equipment Date : - 31/Dec/2oxx Debit (8) credites) cash account 59486 Equipment account 55080. Gain on stadee of 4406 Equipment [Being Equipment sold for gain of $4406] (a) Depreciation for first year = $11790. (b) Gain on sale of Equipment = $4406.