Equipment was acquired at the beginning of the year at a cost of $76,380. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,620. a. What was the depreciation expense for the first year? $ b. Assuming the equipment was sold at the end of the second year for $57,700, determine the gain or loss on sale of the equipment. ▼ c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank or enter "0".

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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### Depreciation and Sale of Equipment

**Problem Statement:**

Equipment was acquired at the beginning of the year at a cost of $76,380. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,620.

---

#### Questions:

**a. What was the depreciation expense for the first year?**

\[$\]

**b. Assuming the equipment was sold at the end of the second year for $57,700, determine the gain or loss on sale of the equipment.**

\[$\] \[ \]

**c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank or enter "0".**

\[
\begin{array}{|c|c|}
\hline
\text{Account Title} & \text{Debit} \\
\hline
\text{[Dropdown]} & \text{\$[Input]} \\
\text{[Dropdown]} & \text{\$[Input]} \\
\text{[Dropdown]} & \text{\$[Input]} \\
\text{[Dropdown]} & \text{\$[Input]} \\
\hline
\text{Account Title} & \text{Credit} \\
\hline
\text{[Dropdown]} & \text{\$[Input]} \\
\text{[Dropdown]} & \text{\$[Input]} \\
\hline
\end{array}
\]

---

**Explanation of the Straight-Line Depreciation Method:**

The straight-line method depreciates an asset by an equal amount each year over its useful life. The formula used is:

\[ \text{Depreciation Expense} = \frac{\text{Cost} - \text{Residual Value}}{\text{Useful Life}} \]

In this scenario:

- Cost of the equipment = $76,380
- Residual value = $7,620
- Useful life = 6 years

The depreciation expense per year would be calculated as:

\[ \text{Depreciation Expense} = \frac{76,380 - 7,620}{6} = \frac{68,760}{6} = \$11,460 \]

**Understanding Gains and Losses on Asset Sale:**

When an asset is sold, the gain or loss is determined by comparing the
Transcribed Image Text:--- ### Depreciation and Sale of Equipment **Problem Statement:** Equipment was acquired at the beginning of the year at a cost of $76,380. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,620. --- #### Questions: **a. What was the depreciation expense for the first year?** \[$\] **b. Assuming the equipment was sold at the end of the second year for $57,700, determine the gain or loss on sale of the equipment.** \[$\] \[ \] **c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank or enter "0".** \[ \begin{array}{|c|c|} \hline \text{Account Title} & \text{Debit} \\ \hline \text{[Dropdown]} & \text{\$[Input]} \\ \text{[Dropdown]} & \text{\$[Input]} \\ \text{[Dropdown]} & \text{\$[Input]} \\ \text{[Dropdown]} & \text{\$[Input]} \\ \hline \text{Account Title} & \text{Credit} \\ \hline \text{[Dropdown]} & \text{\$[Input]} \\ \text{[Dropdown]} & \text{\$[Input]} \\ \hline \end{array} \] --- **Explanation of the Straight-Line Depreciation Method:** The straight-line method depreciates an asset by an equal amount each year over its useful life. The formula used is: \[ \text{Depreciation Expense} = \frac{\text{Cost} - \text{Residual Value}}{\text{Useful Life}} \] In this scenario: - Cost of the equipment = $76,380 - Residual value = $7,620 - Useful life = 6 years The depreciation expense per year would be calculated as: \[ \text{Depreciation Expense} = \frac{76,380 - 7,620}{6} = \frac{68,760}{6} = \$11,460 \] **Understanding Gains and Losses on Asset Sale:** When an asset is sold, the gain or loss is determined by comparing the
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