Question

On July 1, 2016, Alpha Company purchased for $66,000, equipment having a service life of eight years and an estimated residual value of $16,000. Alpha has recorded depreciation of the equipment using the double-declining balance method. On December 31, 2019, before making any annual adjusting entries, the equipment was sold for $20,000. Use this information to prepare all General Journal entries (without explanation) required to record the sale event for December 31, 2019

Answer 1

Answer:

For using double decline method, the annual depreciation = cost / service life

= $66000 / 8 = $8250

percentage over cost = 8250 / 66000 *100 = 12.5%

By using double decline method we have to double it 12.5% * 2 = 25%, it is annual depreciation rate under this method.

Asset value = 66000 (1 - 12.5%) (1 - 25%) (1 - 25%)

= 66000 (1-0.125) (1-0.25) (1-0.25) = 32484

Depreciation for 2019 yr = 32484 * 0.25 = $8121

Book value on 31 Dec,2019 = 32484 - 8121 = 24363

Loss on sale = 24363 - 20000 = 4363