Question

CHART OF ACCOUNTS

General Ledger

	ASSETS
110	Cash
111	Petty Cash
112	Accounts Receivable
114	Interest Receivable
115	Notes Receivable
116	Merchandise Inventory
117	Supplies
119	Prepaid Insurance
120	Land
121	Equipment
122	Accumulated Depreciation
132	Goodwill
133	Patents

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue
620	Gain on Sale of Equipment

	EXPENSES
510	Cost of Merchandise Sold
520	Salaries Expense
521	Advertising Expense
522	Supplies Expense
523	Delivery Expense
524	Rent Expense
525	Insurance Expense
531	Repairs and Maintenance Expense
541	Depreciation Expense
543	Depletion Expense
544	Amortization Expense-Patents
591	Miscellaneous Expense
710	Interest Expense
720	Loss on Sale of Equipment

Equipment was acquired at the beginning of the year at a cost of $76,020. The equipment was depreciated using the straight-line method based on an estimated useful life of six years and an estimated residual value of $7,800. Required: (a) What was the depreciation expense for the first year? (b) Assuming the equipment was sold at the end of the second year for $57,542, determine the gain or loss on sale of the equipment. (c) Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles.

What was the depreciation expense for the first year?

Assuming the equipment was sold at the end of the second year for $57,542, determine the gain or loss on sale of the equipment.

Journalize the entry to record the sale on December 31. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

a) Depreciation expenses for the first year :

Depreciable cost = (76020-7800) = 68220

Depreciation expenses = 68220/6 = 11370

b) Calculate gain or loss :

Book value at the end of second year = 76020-(11370*2) = 53280

Gain or loss on sales = Sale price-Book value at the end of second year

= 57542-53280

Gain on sale of equipment = 4262

c) Journal entry

Date	accounts & explanation	debit	credit
	Cash	57542
	Accumlated depreciation	22740
	Gain on sale of equipment		4262
	Equipment		76020
	(To record sale of equipment)

answered by: anonymous