On March 31, 2021, management of Quality Appliances committed to
a plan to sell equipment. The equipment was available for immediate
sale, and an active plan to locate a buyer was initiated. The
equipment had been purchased on January 1, 2019, for $260,000. The
equipment had an estimated six-year service life and residual value
of $20,000. The equipment was being depreciated using the
straight-line method. Quality’s fiscal year ends on December
31.
Required:
1. Calculate the equipment’s book value as of
March 31, 2021 (Hint: Depreciation for 2021 would include
up to March 31).
2. By December 31, 2021, the equipment has not
been sold, but management expects that it will be sold in 2022 for
$150,000. For what amount is the equipment reported in the December
31, 2021, balance sheet?
Answer to the above question is shown.
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