### Accounting for Disposal of Equipment**Scenario:**Counselors of Mableton purchased equipment on January 1, 2017, for $44,500. They expected the equipment to last for eight years with a residual value of $4,500. The equipment was sold for $25,700 on December 31, 2020, after being used for four years. Assume straight-line depreciation was used and that depreciation for 2020 has been recorded.**Steps to Calculate Gain or Loss on Disposal:**1. **Market Value of Assets Received:** - $25,7002. **Book Value of Asset Disposed:** - **Cost:** $44,500 - **Less: Accumulated Depreciation:** - (Depreciation per year: $\frac{44,500 - 4,500}{8} = 5,000$) - Accumulated Depreciation for 4 years: $5,000 \times 4 = 20,000$ - **Book Value:** $44,500 - 20,000 = 24,500$3. **Gain or Loss Calculation:** - Selling Price: $25,700 - Book Value: $24,500 - **Gain or (Loss):** $25,700 - 24,500 = 1,200$Thus, the gain on the disposal of the equipment is $1,200.---**Illustration of the Calculation:**```Market value of assets received: $25,700Less: Book value of asset disposed of: - Cost: $44,500 - Less: Accumulated Depreciation: $20,000---------------------------------------------------------------------- = Book Value: $24,500Gain or (Loss): $ 1,200```This gain results from selling the equipment for more than its book value at the time of sale. Thus, the transaction reflects positively on the financial statements for the year.

Name: ### Accounting for Disposal of Equipment**Scenario:**Counselors of Ma
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
Description: ### Accounting for Disposal of Equipment**Scenario:**Counselors of Mableton purchased equipment on January 1, 2017, for $44,500. They expected the equipment to last for eight years with a residual value of $4,500. The equipment was sold for $25,700

Annual depreciation = (Cost of the assets - Residual value) / Life of the assets

Business

Accounting

3. Counselors of Mableton purchased equipment on January 1, 2017, for $44,500. Counselors of Mableton expected the equipment to last for eight years and have a residual value of $4,500. Suppose Counselors of Mableton sold the equipment for $25,700 on December 31, 2020, after using the equipment for four full years. Assume depreciation for 2020 has been recorded. Journalize the sale of the equipment, assuming straight-line depreciation was used. First, calculate any gain or loss on the disposal of the equipment. Market value of assets received 25,700 Less: Book value of asset disposed of Cost 44,500 Less: Accumulated Depreciation Gain or (Loss)

3. Counselors of Mableton purchased equipment on January 1, 2017, for $44,500. Counselors of Mableton expected the equipment to last for eight years and have a residual value of $4,500. Suppose Counselors of Mableton sold the equipment for $25,700 on December 31, 2020, after using the equipment for four full years. Assume depreciation for 2020 has been recorded. Journalize the sale of the equipment, assuming straight-line depreciation was used. First, calculate any gain or loss on the disposal of the equipment. Market value of assets received 25,700 Less: Book value of asset disposed of Cost 44,500 Less: Accumulated Depreciation Gain or (Loss)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Denim, Inc. purchased a building on January 1, 2010. The building cost $2,600,000 and had an…

A: Introduction:- The following Basic information needs to understand as follows under:- Denim, Inc.…

Q: On January 1, 2017, Garden Company purchased a new machine for $4,200,000. The new machine has an…

A: Lets understand the basics. Depreciation is a reduction in value of asset due to wear and tear,…

Q: On January 1, 2017, Extensive Manufacturing purchased a machine for $780,000 that it expected to…

A: Asset disposal: It involves removing assets from accounting records(balance sheet).An asset may…

Q: Clean Corporation purchased a depreciable asset for $1,560,000 on January 1, 2015. The estimated…

A: DEPRECIATION EXPENSE Depreciation means gradual decrease in the value of an asset due to normal wear…

Q: Bucker Company purchased a fabrication machine on January 1, 2020 for $55,000. The machine is…

A: The depreciation expense is charged on fixed assets as the reduction in the value of fixed assets…

Q: Blossom Company purchased a delivery truck for $48,000 on July 1, 2025. The truck has an expected…

A: Depreciation is considered as an expense charge on the value of the Asset. It can be calculated by…

Q: Calculate the amount of the loss

A: DETAILS GIVEN IN THE QUESTION, Date of purchase = 01/02/2006 purchase value = $359,000 useful…

Q: On January 1, 2018, Check Co. bought a machine for $15,000. Residual value was estimated to be…

A: The answer is as fallows

Q: On January 1, 2019, Clemente Company purchased a new truck for $14,700. Its estimated useful life is…

A: Formula: Units of Production Depreciation expense = ( Asset cost - Salvage value ) / Total Estimated…

Q: Alteran Corporation purchased office equipment for $1.5 million in 2015. The equipment is being…

Q: Katie, your Accounting Manager, has asked you to calculate the depreciation for the new company car.…

A: The objective of the question is to calculate the depreciation expense for a company car for the…

Q: Clean Corporation purchased a depreciable asset for $1,560,000 on January 1, 2015. The estimated…

A: Depreciation expense is the non-cash expense which is determined by the entity to charge regular…

Q: Becker Office Service purchased a new computer system on January 1, 2018, for $39,600. It is…

A: Depreciation means the amount fixed assets written off due to normal wear and tear , normal usage ,…

Q: Jim Fleur purchased equipment on April 1, 2020, for $90,000. The equipment is expected to have a…

A: Straight line method of depreciation is that method in which cost of the asset is depreciated over…

Q: On January 1, 2019, Williams Company purchased a copy machine. The machine costs $160,000, its…

A: Depreciation Expenses - Depreciation Expenses are the expense incurred on the wear and tear of the…

Q: Alex Company purchased a lathe on January 1, 2022, at a cost of $45,000. At the time of purchase,…

A: Straight-line depreciation is a method of allocating the cost of an asset evenly over its estimated…

Q: Ehrlich Company purchased equipment in 2015 for $150,000 and estimated a $10,000 salvage value at…

A: Depreciation exp $3,500.00 To Accumulated Depreciation $3,500.00…

Q: Sayers Company purchased a building for $250,000 on January 2, 2019. The building has an expected…

Q: On March 1, 2020, Peggy's Cafe acquired equipment for $220.000. The estimated life of the equipment…

A: Activity-based depreciation method is also called a unit-of-production method. Depreciation is…

Q: NC purchased a cement mixer for $ 14500. The mixer is expected to have a useful life of five years…

A: Annual Depreciation (straight line method) = (Cost of the assets - Residual value) / Expected life…

Q: Gundrum Company purchased equipment on January 1, 2015 for $811,400. The equipment was expected to…

A: Given that, Gundrum Company purchased equipment on January 1, 2015, for $811,400 equipment was…

Q: cember 31, 2021, Jaco uld Jacob Inc. record o

A: Answer : Depreciation per year = ($48,000 - $8000) / 8 = $5,000 Truck price : On 31 Dec.2019…

Q: Salamon Company purchased equipment on January 1, 2020 for $90,000. It is estimated that the…

A: Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life…

Q: Tamarisk Company purchased a computer for $9,280 on January 1, 2019. Straight-line depreciation is…

A: Depreciation is a reduction in the value of assets due to the usage of that asset. We can evaluate…

Q: A microcomputer was purchased on January 1, 2017 at a cost of $11,000. It is expected to have a…

A: Depreciation is the allocation of cost of asset over the useful life of the asset. Straight line…

Q: Freedom Co. purchased a new machine on July 2, 2019, at a total installed cost of $48,000. The…

A: Depreciation is the non-cash expense which is reported in the income statement of the entity. It is…

Q: On January 1, 2020, Grand Manufacturing purchased a machine for $370,000 that it expected to have a…

A: Journal Entry :— It is an act of recording transactions in books of account when transaction…

Concept explainers

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.

Topic Video

Question

100%

### Accounting for Disposal of Equipment

**Scenario:**
Counselors of Mableton purchased equipment on January 1, 2017, for $44,500. They expected the equipment to last for eight years with a residual value of $4,500. The equipment was sold for $25,700 on December 31, 2020, after being used for four years. Assume straight-line depreciation was used and that depreciation for 2020 has been recorded.

**Steps to Calculate Gain or Loss on Disposal:**

1. **Market Value of Assets Received:**
- $25,700

2. **Book Value of Asset Disposed:**
- **Cost:** $44,500

- **Less: Accumulated Depreciation:**
- (Depreciation per year: $\frac{44,500 - 4,500}{8} = 5,000$)
- Accumulated Depreciation for 4 years: $5,000 \times 4 = 20,000$
- **Book Value:** $44,500 - 20,000 = 24,500$

3. **Gain or Loss Calculation:**
- Selling Price: $25,700
- Book Value: $24,500
- **Gain or (Loss):** $25,700 - 24,500 = 1,200$

Thus, the gain on the disposal of the equipment is $1,200.

---

**Illustration of the Calculation:**

```
Market value of assets received: $25,700
Less: Book value of asset disposed of:
- Cost: $44,500
- Less: Accumulated Depreciation: $20,000
----------------------------------------------------------------------
= Book Value: $24,500

Gain or (Loss): $ 1,200
```

This gain results from selling the equipment for more than its book value at the time of sale. Thus, the transaction reflects positively on the financial statements for the year.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Wildhorse Company purchaseda hot tub for $ 11,790 on January 1, 2016. Straight-line depreciation is used, based on a 6-year life and a $ 1,890 salvage value. In 2018, the estimates are revised. Wildhorse now feels the hot tub will be used until December 31, 2020, when it can be sold for $ 885. Compute the 2018 depreciation. Depreciation expense, 2018 %24
Please answer complete and working note
On July 1, 2019, Cullumber Company purchased new equipment for $90,000. Its estimated useful life was 6 years with a $12,000 salvage value. On December 31, 2022, the company estimated that the equipment’s remaining useful life was 10 years, with a revised salvage value of $5,000. Compute the revised annual depreciation on December 31, 2022.
Duluth Ranch, Incorporated purchased a machine on January 1, 2021. The cost of the machine was $44,000. Its estimated residual value was $14,000 at the end of an estimated 5-year life. The company expects to produce a total of 20,000 units. The company produced 1,600 units in 2021 and 2,050 units in 2022. Required: a. Calculate depreciation expense for 2021 and 2022 using the straight-line method. b. Calculate the depreciation expense for 2021 and 2022 using the units-of-production method. c. Calculate depreciation expense for 2021 through 2025 using the double-declining balance method. Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate the depreciation expense for 2021 and 2022 using the units-of-production method. (Do not round your intermediate calculations. Round your final answers to the nearest whole dollar.) 2021 2022 Depreciation Expense
Hahaa
Winia Corporation purchased farm equipment on January 1, 2019, for $280,000. In 2019 and 2020, Winia depreciated the asset on a straight-line basis with an estimated useful life of five years and a $90,000 residual value. In 2021, due to changes in technology, Winia revised the residual value to $30,000 but still plans to use the equipment for the full five years. What depreciation would Winia record for the year 2021 on this equipment? $8,000
On September 30, 2017, Foley Distribution Service purchased a copy machine for $36,800. Foley Distribution Service expects the machine to last for four years and to have a residual value of $2,000. Compute depreciation expense on the machine for the year ended December 31, 2017, using the straight-line method.
Tinker Bell Company sold a delivery wing truck on March 1, 2022. Tinker had acquired the wing truck on January 1, 2019, for $ 52,000. At acquisition, Tinker had estimated that the truck would have a useful life of 6 years and a residual value of $4,000. On December 31, 2021, the truck had a book value of $ 28,000. Required: Prepare the journal entries to recognized the depreciation expense for 2022 prior to the sale and the sale of the truck assuming the truck sold at the following different prices (you will have 3 entries total): $32,000 26,000
On August 1, 2015, Toy Inc. purchased a new piece of equipment that cost $25000. The estimated useful life is five years and the estimated residual value is $2,500. During the five years of useful life the equipment is expected to produce 10,000 units. If Toy Inc. uses the straight line method of depreciation and sells the equipment for $11,500 on August 1st, 2018. What will be the realized gain (loss)? Multiple Choice $0 $4,500 $13,500 None of the other alternatives are correct ($9,000) X
devrat
On January 1, 2019, Woodstock, Inc. purchased a machine costing $42.400. Woodstock also paid $2,200 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $6.200. If Woodstock uses the straight-line depreciation method, which of the following statements is incorrect? Multiple Cholce The December 31, 2020 book value Is$25.600. The annual depreclation expense Is $6.400. The December 31, 2019 book value Is $38.200. The December 31, 2021 accumulated depreclation balance is $19.200,
Funseth Farms Inc. purchased a tractor in 2018 at a cost of $34,800. The tractor was sold for $3,400 in 2021. Depreciation recorded through the disposal date totaled $30,000. (1) Prepare the journal entry to record the sale. (2) Now assume the tractor was sold for $11,200; prepare the journal entry to record the sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 Record the sale of the tractor for $3,400. Note: Enter debits before credits. Event 1 Record entry General Journal Clear entry Debit Credit View general journal >