Question

Equipment acquired on January 8 at a cost of $144,930 has an estimated useful life of 14 years, has an estimated residual value of $8,850, and is depreciated by the straight-line method. A. What was the book value of the equipment at December 31 the end of the fourth year? B. Assuming that the equipment was sold on April 1 of the fifth year for $98,290, journalize the entries to record (1) depreciation for the three months until the sale date and (2) the sale of the equipment. Refer to the Chart of Accounts for exact wording of account titles Round your answer to the nearest whole dollar.

Answer 1

a) Depreciation expense per year = (144930-8850/14) = $9720 per year

Book value at the end of fourth year = 144930-(9720*4) = $106050

b) Journal entry

Date	account and explanation	debit	credit
Apr 1	Depreciation expense (144930-8850/14)*3/12	2430
	Accumulated depreciation-equipment		2430
	(To record dep)
Apr 1	Cash	98290
	Accumulated depreciation-equipment	41310
	Loss on sale of equipment	5330
	Equipment		144930
	(To record sale of equipment)