Question

Q3/

On January 1, 2016, Cullumber Corporation acquired equipment costing $77,440. It was estimated at that time that the equipment would have a useful life of eight years and no residual value. The company uses the straight-line method of depreciation for its equipment, and its year end is December 31.

A/

Calculate the equipment’s accumulated depreciation and carrying amount at the beginning of 2018.

Equipment’s accumulated depreciation		$
Carrying amount		$

B/

What is the amount of the gain or loss that would arise when a quarter of the equipment was sold on January 1, 2018, for cash proceeds of $18,540?

LossGainfrom sale of equipment

$

C/

What is the depreciation expense for January 1, 2018, to October 31, 2018?

Depreciation expense

$

D/

On November 1, 2018, the company purchased additional equipment for $10,320 that also had a useful life of eight years and no residual value. What is the depreciation for the two months ending December 31, 2018?

Total depreciation for 2 months

$

E/

On December 31, 2018, the company sold some equipment for a loss of $2,820. After recording the sale, the balances in the Equipment account and Accumulated Depreciation account were $55,960 and $15,256, respectively. Based on this information, what were the proceeds received when this equipment was sold?

Cash proceeds from sale

$

Answer 1

Answer to Requirement A. Straight Line Depreciation per year (Cost-Salvage Value) / Useful Life Straight Line Depreciation per year ($77,440-$0)/8 Straight Line Depreciation per year $9,680 Equipment Accumulated Depreciation = Annual Depreciation No. of Years used Equipment Accumulated Depreciation, at the beginning of 2018 $9,680 * 2 Equipment Accumulated Depreciation, at the beginning of 2018 $19,360 Carrying Value = Cost- Accumulated Depreciation Carrying Value, at the beginning of 2018 = $77,440- $19,360 Carrying Value, at the beginning of 2018 = $58,080 Answer to Requirement B. Carrying Value of Quarter of Equipment $58,080 Carrying Value of Quarter of Equipment = $14,520 1/4 Sale Proceeds = $18,540 Gain /(Loss) on sale of Equipment = $18,540- $14,520 Gain on sale of Equipment = $4,020

7 8 9ET10 11 12- 13.1 14 16 Answerto Reguirement C Carrying Value of Remaining Equipment $58,080 * 3/4 Carrying Value of Remaining Equipment=$43,560 Annual Depreciation = ($43.560- $0) /6 Annual Depreciation = $7.260 Depreciation Expense for January 1, 2018 to October 31, 2018 $7,260 10/12 Depreciation Expense for January 1, 2018 to October 31, 2018 $6,050 Answer to Requirement D. Annual Depreciation Expense on Additional Equipment ($10,320 $0) /8 Annual Depreciation Expense on Additional Equipment $1,290 Depreciation Expense for November 1, 2018 to December 31, 2018 ($7,260 * 2/12) + ($1,290 * 2/12) Depreciation Expense for November 1, 2018 to December 31, 2018= $1,425