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On January 1, 2016, Walid Company purchases equipment for $12,000 with 4 years estimated useful life...

On January 1, 2016, Walid Company purchases equipment for $12,000 with 4 years estimated useful life and no salvage value. On December 31, 2019, Walid Company retires the equipment. The straight-line method of depreciation is applied and financial statements are prepared yearly. The retirement entry is: *

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Answer #1

Cost of equipment = $12,000

Useful life = 4 years

Annual depreciation expense = Cost of equipment/Useful life

= 12,000/4

= $3,000

Equipment was purchased On January 1, 2016 and it was retired on December 31, 2019. Hence, equipment was used for 4 years.

Accumulated depreciation for 4 years = Annual depreciation expense x 4

= 3,000 x 4

= $12,000

Book value of equipment at December 31, 2019 = Cost of equipment - Accumulated depreciation for 4 years

= 12,000 - 12,000

= $0

The retirement entry is:

December 31, 2019 Accumulated depreciation 12,000
Equipment 12,000
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