Question

Patel Limited sells equipment on September 30, 2020 for $84,000.  The equipment originally cost $288,000 when purchased...

Patel Limited sells equipment on September 30, 2020 for $84,000.  The equipment originally cost $288,000 when purchased on January 1, 2018.  It has an estimated residual value of $40,000 and a useful life of five years.  Depreciation was last recorded on December 31, 2019, the company’s year end.

Prepare the journal entries to:

1) update depreciation using the straight line method to September 30, 2020

2) record the sale of the equipment

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Depreciation under Straight line method
depreciation = (Cost of the asset - Salvage Value)/ Useful life of asset
= ($288000- $40000)/5
=$248000/5
=$49600 per year
Depreciation expense per year = $49600
Year Opening Carrying Amount Depreciation Expense Accumuated Depreciation Book value
31 Dec 2018 2,88,000 49,600 49,600 2,38,400
31 Dec 2019 2,38,400 49,600 99,200 1,88,800
30 Sep 2020 1,88,800 37,200 (9 months ) 1,36,400 1,51,600

2) Sale of Equipment

Book Value of Equipment = $151,600

Sale Value of Equipment = $84000

Loss on Sale of Equipment = $151600 - $84000 = $67600

Journal Entry for sale of Equipment:

Date General Journal Debit Credit
30 Sep 2020 Cash $84000
Accumulated Depreciation $136400
Loss on Sale of Asset $67600
Equipment $288000
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Pharoah Company sells equipment on March 31, 2021, for $33,740 cash. The equipment was purchased on...
Pharoah Company sells equipment on March 31, 2021, for $33,740 cash. The equipment was purchased on January 5, 2018, at a cost of $82,500, and had an estimated useful life of five years and a residual value of $2,600. Pharoah Company uses straight-line depreciation for equipment. Adjusting journal entries are made annually at the company’s year end, December 31. 1. Prepare the journal entry to update depreciation to March 31, 2021. 2. Prepare the journal entry to record the sale...
On January 2, 2017, Barnes Enterprises purchased equipment for $42,000 cash, expecting the equipment to remain...
On January 2, 2017, Barnes Enterprises purchased equipment for $42,000 cash, expecting the equipment to remain in service for five years, with a $4,000 residual value. Barnes uses straight-line depreciation. On April 30, 2019, Barnes sold the equipment for $20,000 cash. Requirement: Prepare the journal entries to record the purchase of the equipment; depreciation for 2017, 2018, and 2019; and the sale of the equipment. Omit explanations and round to the nearest dollar.
On January 1, 2018, Iron Limited purchased a piece of equipment for production of goods. The...
On January 1, 2018, Iron Limited purchased a piece of equipment for production of goods. The purchase price of the equipment was $670,000. Iron Limited paid on the date of purchase by the issue of ordinary shares. Iron Limited estimated that the equipment has an expected useful life of 4 years with a residual value of $30,000 on December 31, 2021. On February 15, 2020, Iron Limited disposed of equipment for cash amount of $358,000. Iron Limited adopts revaluation model...
Lisa Limited Pty Ltd purchases a new equipment on 1 January 2015. The equipment cost was...
Lisa Limited Pty Ltd purchases a new equipment on 1 January 2015. The equipment cost was $200,000 and useful life was 10 years with zero residual value. On January 1, 2019, the company decides that the equipment will last total 20 years rather than 10 years. The company uses straight-line method of depreciation and the fiscal year end is 31 December. Required: Calculate depreciate for 2015, 2016, 2017 and 2018. How will the equipment be reported on the balance sheet...
Equipment was acquired on January 1, 2010, at a cost of ¥2,000,000. The equipment was originally...
Equipment was acquired on January 1, 2010, at a cost of ¥2,000,000. The equipment was originally estimated to have a residual value of ¥100,000 and an estimated life of 10 years. Depreciation has been recorded through December 31, 2013, using the straight-line method. On January 1, 2014, the estimated residual value was revised to ¥140,000 and the useful life was revised to a total of 8 years. Instructions Determine the Depreciation Expense for 2014. Ex. 274 Equipment was acquired on...
Equipment was acquired on January 1, 2019 at a cost of $197,000. The equipment was originally...
Equipment was acquired on January 1, 2019 at a cost of $197,000. The equipment was originally estimated to have a salvage value of $12,000 and an estimated life of 10 years. Depreciation has been recorded through December 31, 2021 using the straight-line method. On January 1, 2022, the estimated salvage value was revised to $43,000 and the useful life was revised to a total of 8 years. Prepare the journal entry to record depreciation expense for 2022. (Credit account titles...
A company owns equipment which originally cost $300,000. The estimated salvage value is $50,000 and it...
A company owns equipment which originally cost $300,000. The estimated salvage value is $50,000 and it was anticipated that the equipment would operate for 100,000 total hours over its useful life. The equipment's Accumulated Depreciation amounted to $108,000 after adjustment on December 31, 2018, based on the units-of-production method of depreciation. On June 1, 2019, the company sells the equipment for $214,000 cash. Between January 1 and June 1, 2019 the equipment operated for 2,500 hours. Assume the company makes...
Trainor Corporation purchased equipment at a cost of $500,000. The equipment has an estimated residual value...
Trainor Corporation purchased equipment at a cost of $500,000. The equipment has an estimated residual value of $50,000 and an estimated life of 5 years, or 10,000 hours of operation. The equipment was purchased on January 1, 2020 and was used 2,500 hours in 2020 and 2,100 hours in 2021. On January 1, 2022, the company decided to sell the equipment for $315,000. Trainor Corporation uses the units-of- production method to account for the depreciation on the equipment. Based on...
The Black Company purchased equipment on June 1, 2020.  Assuming the cost of the equipment is $66,000,...
The Black Company purchased equipment on June 1, 2020.  Assuming the cost of the equipment is $66,000, the residual value is $6,000, a useful life of 5 years and the use of the straight line method. The company's year end is December 31. 1) What is depreciation expense at December 31, 2020? 2) What is accumulated depreciation at December 31, 2022? 3) What is the carrying value of the asset at December 31, 2023? 4) What is the carrying value of...
Nanki Corporation purchased equipment on January 1, 2019, for $647,000. In 2019 and 2020, Nanki depreciated...
Nanki Corporation purchased equipment on January 1, 2019, for $647,000. In 2019 and 2020, Nanki depreciated the asset on a straight-line basis with an estimated useful life of eight years and a $15,000 residual value. In 2021, due to changes in technology, Nanki revised the useful life to a total of four years with no residual value. What depreciation would Nanki record for the year 2021 on this equipment?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT