Assume that equipment is purchased at a cost of $10,000 with no residual value and is depreciated at a straight line rate of 10%.The equipment was sold for cash on Oct 12 of the eighth year of its use. The balance of accumulated depreciation account as of the preceding Dec 31 (end of 7th yr) is $7,000. Required: a. Entry to update the depreciation for the 9 months of the current year . b. Assuming that the equipment was sold for $ 2,800 on Oct 12, determine the gain or loss on the sale of equipment. c. Journalize the entry to record the sale. Hint: calculate book value of the equipment as on oct 12 and compare with the amount of cash getting in return.
Assume that equipment is purchased at a cost of $10,000 with no residual value and is depreciated at a straight line rate of 10%.The equipment was sold for cash on Oct 12 of the eighth year of its use. The balance of accumulated depreciation account as of the preceding Dec 31 (end of 7th yr) is $7,000. Required: a. Entry to update the depreciation for the 9 months of the current year . b. Assuming that the equipment was sold for $ 2,800 on Oct 12, determine the gain or loss on the sale of equipment. c. Journalize the entry to record the sale. Hint: calculate book value of the equipment as on oct 12 and compare with the amount of cash getting in return.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assume that equipment is purchased at a cost of $10,000 with no residual value and is
depreciated at a straight line rate of 10%.The equipment was sold for cash on Oct 12 of
the eighth year of its use. The balance of
preceding Dec 31 (end of 7th yr) is $7,000.
Required:
a. Entry to update the depreciation for the 9 months of the current year .
b. Assuming that the equipment was sold for $ 2,800 on Oct 12, determine the gain or
loss on the sale of equipment.
c.
Hint: calculate book value of the equipment as on oct 12 and compare with the amount of cash getting
in return.
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