Allyn Company purchased equipment costing $55,000 on January 1, Year 1. The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 5 years. Double-declining-depreciation is used, and all depreciation has been recorded as of December 31, Year 2. If the equipment is sold on December 31, Year 2 for $15,000, the journal entry to record the sale is: A.Debit Cash, $15,000; Debit Accumulated Depreciation, $22,000; Debit Loss on Sale, $18,000; Credit Equipment, $55,000. B. Debit Cash, $15,000; Debit Accumulated Depreciation, $13,200; Debit Loss on Sale, $26,800; Credit Equipment, $55,000. C. Debit Cash, $15,000; Debit Accumulated Depreciation, $35,200; Debit Loss on Sale, $4,800; Credit Equipment, $55,000. D. Debit Cash, $15,000; Debit Accumulated Depreciation, $40,000; Credit Equipment, $55,000. E. Debit Cash, $15,000; Debit Loss on Sale, $40,000; Credit Equipment, $55,000.
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.
Allyn Company purchased equipment costing $55,000 on January 1, Year 1. The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 5 years. Double-declining-
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