Question

Only " Using Straight line method of depreciation " Each sale entry is a four line...

Only " Using Straight line method of depreciation " Each sale entry is a four line entry.

E10.10 (LO 3) Pryce Company owns equipment that cost $65,000 when purchased on January 1, 2017. It has been depreciated using the straight-line method based on estimated salvage value of $5,000 and an estimated useful life of 5 years.

a. Sold for $31,000 on January 1, 2020.

b. Sold for $31,000 on May 1, 2020.

c. Sold for $11,000 on January 1, 2020.

d. Sold for $11,000 on October 1, 2020.

Business   Accounting   
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Homework Answers

Answer #1

Depreciation under Straight-line method = (Cost - Salvage value) / Estimated useful life

= ($65,000 - $5,000) / 5

= $12,000

Accumulated depreciation on January 1, 2020 = $12,000 * 3 = $36,000

Accumulated depreciation on May 1, 2020 = ($12,000 * 3) + ($12,000 * 4 / 12) = $40,000

Accumulated depreciation on October 1, 2020 = ($12,000 * 3) + ($12,000 * 9 / 12) = $45,000

a.

January 1, 2020 Cash $31,000
Accumulated depreciation $36,000
Equipment $65,000
Gain on sale $2,000

b.

May 1, 2020 Cash $31,000
Accumulated depreciation $40,000
Equipment $65,000
Gain on sale $6,000

c.

January 1, 2020 Cash $11,000
Accumulated depreciation $36,000
Loss on sale $18,000
Equipment $65,000

d.

October 1, 2020 Cash $11,000
Accumulated depreciation $45,000
Loss on sale $9,000
Equipment $65,000
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