Equipment was acquired at the beginning of the year at a cost of $76,920. The equipment was depreciated using the straight-line method based on an estimated useful ife of six years and an estimated residual value of $7,980. a. What was the depreciation expense for the first year? b. Assuming the equipment was sold at the end of the second year for $58,300, 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.
Equipment was acquired at the beginning of the year at a cost of $76,920. The equipment was depreciated using the straight-line method based on an estimated useful ife of six years and an estimated residual value of $7,980. a. What was the depreciation expense for the first year? b. Assuming the equipment was sold at the end of the second year for $58,300, 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.
Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion
Section: Chapter Questions
Problem 7BCRQ
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Equipment was acquired at the beginning of the year at a cost of $76,920. The equipment was depreciated using the straight-line method based on an estimated useful
life of six years and an estimated residual value of $7,980.
a. What was the depreciation expense for the first year?
b. Assuming the equipment was sold at the end of the second year for $58,300, 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.
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