Question

1) On Jan1 2015, Wax purchased equipment for $60000 cash, expecting it to remain in service for 6 years. The corporation depreciates the equipment on a straight-line basis, with $2000 residual value. On May31 2017, the corporation sold the equipment for $18000 cash. Record both depreciation expense for 2017 and sale of the equipment on May31 2017.

2) Equipment was acquired on Jan1 2014, at a cost of $170000. The equipment was originally estimated to have a salvage value of $10000 and an estimated life of 10 years. Depreciation has been recorded through Dec31 2016, using straight-line method. On Jan1 2017, the estimated salvage value was revised to $16000 and the useful life was revised to a total of 8 years. Calculate depreciation expense for 2017 and prepare the journal entry.

Answer 1

1) Journal entry

Date	account and explanation	Debit	Credit
May 31	Depreciation expense (58000/6)*5/12	4028
	Accumulated depreciation-equipment		4028
May 31	Cash	18000
	Accumulated depreciation-equipment (9667*2+4028)	23362
	Loss on sale of equipment	18638
	equipment		60000
	(To record sale of equipment)

2) Accumulated depreciation = (170000-10000/10)*3 = 48000

Revised depreciation = (170000-48000-16000)/5 = 21200

Date	account and explanation	Debit	Credit
2017	Depreciation expense	21200
	Accumulated depreciation-equipment		21200