Equipment was acquired at the beginning of the year at a cost of $30,000. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of ten years and an estimated residual value of $580. a. What was the depreciation for the first year? 6,000 b. Assuming the equipment was sold at the end of year 2 for $7,390, determine the gain or loss on the sale of the equipment. 12,270 X Loss v
Equipment was acquired at the beginning of the year at a cost of $30,000. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of ten years and an estimated residual value of $580. a. What was the depreciation for the first year? 6,000 b. Assuming the equipment was sold at the end of year 2 for $7,390, determine the gain or loss on the sale of the equipment. 12,270 X Loss v
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter11: Depreciation, Depletion, Impairment, And Disposal
Section: Chapter Questions
Problem 5MC: A machine with a 4-year estimated useful life and an estimated 15% residual value was acquired on...
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Sale of Equipment
Equipment was acquired at the beginning of the year at a cost of $30,000. The equipment was depreciated using the double-declining-balance method based on an
estimated useful life of ten years and an estimated residual value of $580.
a. What was the depreciation for the first year?
$
6,000
b. Assuming the equipment was sold at the end of year 2 for $7,390, determine the gain or loss on the sale of the equipment.
$
12,270 X Loss
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Book value is the asset cost minus accumulated depreciation. In the first year, the balance in the accumulated depreciation account is zero.
Compare the book value to the sale price. If the book value is more than the sale price, the equipment was sold for a loss. If the book value is less than the sale price, the equipment was
sold for a gain.
Learning Objective 3.
c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
Cash V
6,930
X
Accumulated Depreciation-Equipment
10,800
Loss on Sale of Equipment
12,270
Equipment
30,000
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