Question

Instructions Equipment acquired on January 8 at a cost of $100,870, has an estimated useful life of 12 years, has an estimated tesichual value of $9.550, and is depreciated by the straightline 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 soid on April 1 of the fith year for $61,657, journalize the entries to record (1) depreciation for the three months until the sale date, and (2) the sale of the equipment Refer to the Chart of Accounts for exact wording of account stes

Answer 1

Part A) answer = $70430

Calculation of annual depreciation under straight line depreciation:

Depreciation = ($100870-$9550)/12 = $91320/12 = $7610

Thus, annual depreciation = $7610

Therefore, depreciation for 4 years = $7610 × 4 = $30440

Hence, book value at the end of 4th year = $100870 - $30440 = $70430

Part B)

First, compute the depreciation for 3 months from 1 january to 31 march:

Depreciation = depreciation for the year × 3/12

= $7610 × 3/12 = $1903

Date	journal	debit	credit
1 april	depreciation	$1903
	To accumulated depreciation - equipment		$1903
	(To record the depreciation for a period of 3 month)
1 april	cash	$61657
	Accumulated depreciation ($30440+$1903)	$32343
	Loss on sale of equipment	$6870
	To equipment		$100870
	(To record the sale of equipment)

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