Question

13. EX.09-17.ALGO (Algorithmic) Entries for Sale of Fixed Asset Equipment acquired on January 5 at a cost of $195,150, has an estimated useful life of 19 years, has an estimated residual value of $8,000, and is depreciated by the straight-line method. a. What was the book value of the equipment at December 31 the end of the fourth year? b. Assuming that the equipment was sold on April 1 of the fifth year for 146,887. 1. Journalize the entry to record depreciation for the three months until the sale date. Round your answers to the nerest whole dollar if required. 2. Journalize the entry to record the sale of the equipment. If an amount box does not require an entry, leave it blank. Do not round intermediate calculations.

Answer 1

Solution a:

Accumulated depreciation for 4 years = ($195150 - $8000) / 19 * 4 = $39,400

Book Value at the end of 4th year = Cost - Accumulated depreciation for 4 years = $195150 - $39400 = $155,750

Solution b-1:

Account Title	Debit	Credit
Depreciation expense [($195150 - $8000)/ 19*3/12]	2463
Accumulated Depreciation		2463
(To record depreciation for 3 months)

Solution b-2:

Account Title	Debit	Credit
Cash Dr	146887
Accumulated Depreciation Dr ($39400 + $2463)	41863
Loss On sale of Equipment	6401
To Equipment		195150