EX 10-17 Entries for sale of fixed asset

Equipment acquired on January 5, 2009, at a cost of $380,000, has an estimated useful life of 16 years, has an estimated residual value of $40,000, and is depreciated by the straight-line method.
a. What was the book value of the equipment at December 31, 2012, the end of the year?
b. Assuming that the equipment was sold on July 1, 2013, for $270,000, journalize the entries to record
(1) depreciation for the six months until the sale date, and (2) the sale of the equipment.

Answer:
a. Cost of equipment....................................................................  $380,000  
Accumulated depreciation at December 31, 2012  
(4 years at $21,250* per year).............................................   85,000
Book value at December 31, 2010...........................................  $295,000
 *($380,000 – $40,000)/16 = $21,250

b.
(1) Depreciation Expense—Equipment ...................... 10,625    
Accumulated Depreciation—Equipment.........  10,625    
Truck depreciation ($21,250 × 6/12 = $10,625).  

(2) Cash......................................... 270,000  
Accumulated Depreciation—Equipment............... 95,625*  
Loss on Sale of Equipment........................ 14,375    
                    Equipment....................................  380,000  
*($85,000 + $10,625 = $95,625)

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