Question

"Show all calculations and work to recieve full credit"

Jann Corporation purchased an equipment on July 1,2016, for $800,000. Management depreciated the equipment using double-declining balance, with an estimated useful life of ten years and $80,000 residual value. On June 30,2018, Jann Corp. decided to sell the equipment to Murry Corp for $650,000. Prepare the journal entry to record the sale of equipment.

Account	Debit	Credit

Answer 1

Answer:-

Depreciation as per Double declining method =

(Cost - Salvage Value ) / Life of Asset = Depreciation as per straight line method

multiplying above with 2 i,e..

depreciation as per straight line method X 2

cost = 800,000

Salvage value = 80,000

cost - salvage = 800,000- 80,000 = 720,000

deprication as double declining will be = (720,000 / 10 ) * 2 = 72000 *2 = 144,000 per year.

so accumulated depreication balance as on 30th june 2018 = 144,000 for 2016-17 + 144,000 for 2017-18

that is 144,000*2 = $288,000

Journal entry on 30th june 2018

Cash account DEBIT $ 650,000
Accumulated Depreciation account DEBIT $ 288,000

Gain on Asset Disposal CREDIT $138,000
Equipment Account CREDIT $800,000