The Outpatient clinic of eastside Hospital acquired X – ray equipment for 79,000 with an expected useful life of 5 year and a 4000 expected residual value Sum of year digits method was used. The equipment was sold at the end of the fourth year for 12,000 cash Required Compute the gain or loss on the sale. Show the journal entries for the transaction in requirement #1 Repeat 2a assuming that the cash price was 7,000 instead of 12,000 ( use Straight line method )
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.
The Outpatient clinic of eastside Hospital acquired X – ray equipment for 79,000 with an expected useful life of 5 year and a 4000 expected residual value Sum of year digits method was used. The equipment was sold at the end of the fourth year for 12,000 cash
Required
- Compute the gain or loss on the sale.
- Show the
journal entries for the transaction in requirement #1 - Repeat 2a assuming that the cash price was 7,000 instead of 12,000 ( use
Straight line method )
Step by step
Solved in 4 steps with 6 images
