Question

Entries for sale of a fixed asset:

Equipment acquired on January 8 at a cost of $165,730 has an estimated useful life of 17 years, has an estimated residual value of $8,650, and is depreciated by the straight-line method.

A.

What was the book value of the equipment at December 31 the end of the fourth year?

B.

Assuming that the equipment was sold on April 1 of the fifth year for $120,655, journalize the entries to record (1) depreciation for the three months until the sale date and (2) the sale of the equipment. Refer to the Chart of Accounts for exact wording of account titles Round your answer to the nearest whole dollar.

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
123	Delivery Truck
124	Accumulated Depreciation-Delivery Truck
125	Equipment
126	Accumulated Depreciation-Equipment
130	Mineral Rights
131	Accumulated Depletion
132	Goodwill
133	Patents

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

EQUITY

310

Common Stock

311

Retained Earnings

312

Dividends

313

Income Summary

Question 1:
A. What was the book value of the equipment at December 31 the end of the fourth year?

2. The sale of the equipment (Journal)

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

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

	EXPENSES
510	Cost of Merchandise Sold
520	Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Delivery Truck
523	Delivery Expense
524	Repairs and Maintenance Expense
529	Selling Expenses
531	Rent Expense
532	Depreciation Expense-Equipment
533	Depletion Expense
534	Amortization Expense-Patents
535	Insurance Expense
536	Supplies Expense
539	Miscellaneous Expense
710	Interest Expense
720	Loss on Sale of Delivery Truck
721	Loss on Sale of Equipment

Answer 1

	Depreciation expense
	(165,730-8650)/17
	9240
a)	Book value at the end of fourth year
	Original cost					165,730
	less:Accumulated depreciation -Equip			(9240*4)		36960
	book value at the end of fourth year					128,770	answer
b)	Date	Accounting titles & explanations				Debit	Credit
	1-Apr	Depreciation expense				2310
		Accumulated depreciation-Equip					2,310
		(9240/12)*3
	1-Apr	Cash				120,655
		Accumulated depreciation-equipment				39270
		loss on sale of Equipment				5,805
		Equipment					165,730