Question

Equipment acquired on January 8, 2013, at a cost of $113,950, has an estimated useful life of 12 years, has an estimated residual value of $7,150, and is depreciated by the straight-line method.

	Required:
A.	What was the book value of the equipment at December 31, 2016, the end of the year?
B.	Assuming that the equipment was sold on July 1, 2017, for $67,430, journalize the entries to record (1) depreciation for the six months until the sale date, and (2) the sale of the equipment. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

--Requirement [A], with workings

A	Cost	$           113,950.00
B	Residual Value	$                7,150.00
C=A - B	Depreciable base	$           106,800.00
D	Life [in years]	12
E=C/D	Annual SLM depreciation	$                8,900.00
F = E x 4 years	Accumulated Depreciation from 2013 to 2016	$              35,600.00
G = A - F	Book Value on 31 Dec 2016	$              78,350.00 = Answer

--Requriement [B]

Date	Accounts title	Debit	Credit
01-Jul-17	Depreciation expense - Equipment [$ 8900 x 6/12]	$                4,450.00
	Accumulated Depreciation - Equipment		$                             4,450.00
	(Depreciation recorded for 6 months)
01-Jul-17	Cash	$              67,430.00
	Accumulated Depreciation - Equipment [35600 + 4450]	$              40,050.00
	Loss on sale/disposal of equipment	$                6,470.00
	Equipment		$                        113,950.00
	(Equipment sold)