Question

1. Equipment purhcased on Jan 1 2017:

Intial Cost 50, 000

Expected Useful Life 5 years

Expected Salvage Value 5, 000

a. record the depreciation expense for 2017 using the straight line method.

assets	liabilities	stockholder's equity

b. what is the book value of the equipment at december 1 2017 after deprecation has been recorded?

c. the equipment sold for 40,000 on june 30, 2018. what is the book value of the equipment on the date of sale? (Need to record depreciation expense to the date of sale)

d. record the sale of equipment from question c. what is the gain or loss on sale?

assets	liabilities	stockholders equity	gain or loss on sale?

Answer 1

Solution a:

Annual depreciation = (Cost - Salvage value) / Useful life = ($50,000 - $5,000) / 5 = $9,000

assets	liabilities	stockholder's equity
-$9,000.00	$0.00	-$9,000.00

Solution b:

Book value of the equipment at december 31 2017 after deprecation has been recorded = $50,000 - $9,000 = $41,000

Solution c:

Depreciation from 01.01.2018 to 30.06.2018 = $45,000 /5*6/12 = $4,500

book value of the equipment on the date of sale = $41,000 - $4,500 = $36,500

Solution d:

assets	liabilities	stockholder's equity	Gain or loss on sale
$3,500.00	$0.00	$3,500.00	$3,500.00