Question

Disposal of Fixed Asset

Equipment acquired on January 6 at a cost of $220,800, has an estimated useful life of 10 years and an estimated residual value of $28,800.

a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation?

Year Depreciation Expense

Year 1 $

Year 2 $

Year 3 $

b. What was the book value of the equipment on January 1 of Year 4? $

c. Assuming that the equipment was sold on January 3 of Year 4 for $155,000, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Cash

Accumulated Depreciation-Equipment

Loss on Sale of Equipment

Equipment

d. Assuming that the equipment had been sold on January 3 of Year 4 for $166,500 instead of $155,000, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Cash

Accumulated Depreciation-Equipment

Equipment

Gain on Sale of Equipment

Answer 1

a) Calculate depreciation expense :

Year 1 = (220800-28800/10) = 19200

Year 2 = 19200

Year 3 = 19200

b) Book value of equipment on january 1 of year 4 = 220800-(19200*3) = $163200

c) Journal entry :

Date	account & expalantion	debit	credit
	Cash	155000
	Accumlated depreciation	57600
	Loss on Sale of Equipment	8200
	Equipment		220800
	(To record sale of equipment)

d) Journal entry :

Date	account & expalantion	debit	credit
	Cash	166500
	Accumlated depreciation	57600
	Gain on Sale of Equipment		3300
	Equipment		220800
	(To record sale of equipment)