Question

Sale of Asset Equipment acquired on January 3, 2013, at a cost of $569,000, has an estimated useful life of 16 years, has an estimated residual value of $56,900, and is depreciated by the straight-line method a. What was the book value of the equipment at December 31, 2016, the end of the year? For decreases in accounts or outflows of cash, enter your answers as negative numbers. Round annual depreciation to the nearest dollar and use this amount in your follow-on calculations. If no account or activity is affected, select "No effect' from the dropdown and leave the corresponding number entry box blank. b1. Assuming that the equipment was sold on July 1, 2017 for $227,600, illustrate the effects on the accounts and financial statement of depreciation for the six months until the sale date. Balance Sheet Income Statement of Cash Flows Llabilities Statement Assets Stockholders' Equity - Accumulated Depreciation - Equipment + No effect = No effect Retained Earnings July 1 July 1. Statement of Cash Flows Income Statement No effect Depreciation expense b2. Assuming that the equipment was sold on July 1, 2017, for $227,600, illustrate the effects on the accounts and financial statement of the sale of the equipment. Balance Sheet Income Statement of Cash Flows Statement Assets Liabilities Stockholders' Equity Cash + Equipment . Accumulated Depreciation Equipment - No effect Retained Earnings July 1 July 1. Statement of Cash Flows Income Statement Investing Loss on disposal of fixed assets

Answer 1

Solution:
a)Calculation of the depreciation as per straight line method

purchase cost of equipment	$569,000.00
Less: Salvage value	$56,900.00
Net value for depreciation	$512,100.00
Useful life of the assets	16 years
Depreciation per year = value of Depreciation / 16 years =	$32,006.25
Total depreciation in 3 years =($32,006.25)	$96,018.75
Book value = purchase price - total depreciation
Purchase price	$569,000
Less :
Total depreciation in 3 years =	96,018.75
Book value at the end of 3 years	$472,981.25

B)

Caclulation of the book value as on April 01

Book value at the end of 3rd year	$472,981.25
Depreciation for the 6 months	$16,003.125
Book value	$456,978.125
Sale value	$227,600
Loss on sales	$229,378.125

Journal entries

Date	Account Title and explanation	Debit	Credit
April 1	Depreciation($32,006.25 *6/12)	$16,003.125
	To equipment		$16,003.125
	(To record the depreciation for 6 months)
April 01	cash	$227,600$
	loss on sale of equipment	$229,378.125
	To equipment		$456,978.125
	(To record the sale of equipment)