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Danish Inc purchased a computer on January 1, 2019, for $1,600,000. The straight-line method of depreciation...

Danish Inc purchased a computer on January 1, 2019, for $1,600,000. The straight-line method of depreciation was used, based on an expected life of 6 years and a residual value of $130,000. Prepare the journal entries to record depreciation for the first 6 months of 2021 and the sale of the computer on July 1, 2021, for $1,000,000.

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Answer #1

Answer:

Journal Entry

Date Accounts Name Debit Credit
1-July-2021 Depreciation $122500
  Accumulated depreciation $122500
((($1600000-$130000)/6)*6/12=$122500)
1-July-2021 Cash $1000000
Accumulated depreciation $612500
  Computer $1600000
  Gain on sale of Computer $12500

Note:

Orginal Cost $1600000
Accumulated depreciation up to 1-July 2021 $612500
((($1600000-$130000)/6)*2years6months)
Book value (A) $987500
Sales Price(Cash) (B) $1000000
Gain on sale of Computer (A-B) $12500

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