Computing Depreciation, Net Book Value, and Gain or Loss on Asset Sale Lynch Company owns and operates a delivery van that originally cost $49,400. Lynch has recorded straight-line depreciation on the van for four years, calculated assuming a $5,000 expected salvage value at the end of its estimated six-year useful life. Depreciation was last recorded at the end of the fourth year, at which time Lynch disposes of this van. a. Compute the net book value of the van on the disposal date. $ b. Compute the gain or loss on sale of the van if the disposal proceeds are: Use a negative sign with your answer if the sale results in a loss. 1. A cash amount equal to the van's net book value. $ 2. $22.500 cash. $ 3. $18.500 cash. $

Computing Depreciation, Net Book Value, and Gain or Loss on Asset Sale Lynch Company owns and operates a delivery van that originally cost $49,400. Lynch has recorded straight-line depreciation on the van for four years, calculated assuming a $5,000 expected salvage value at the end of its estimated six-year useful life. Depreciation was last recorded at the end of the fourth year, at which time Lynch disposes of this van. a. Compute the net book value of the van on the disposal date. $ b. Compute the gain or loss on sale of the van if the disposal proceeds are: Use a negative sign with your answer if the sale results in a loss. 1. A cash amount equal to the van's net book value. $ 2. $22.500 cash. $ 3. $18.500 cash. $

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Description: Computing Depreciation, Net Book Value, and Gain or Loss on Asset SaleLynch Company owns and operates a delivery van that originally cost $49,400. Lynch has recorded straight-line depreciation on the van for four years, calculated assuming a $5,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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.

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Computing Depreciation, Net Book Value, and Gain or Loss on Asset Sale
Lynch Company owns and operates a delivery van that originally cost $49,400. Lynch has recorded straight-line depreciation on the van for four years, calculated assuming a $5,000 expected salvage value at the end of its estimated six-year useful life. Depreciation was last recorded at
the end of the fourth year, at which time Lynch disposes of this van.
a. Compute the net book value of the van on the disposal date.
$
b. Compute the gain or loss on sale of the van if the disposal proceeds are:
Use a negative sign with your answer if the sale results in a loss.
1. A cash amount equal to the van's net book value. $
2. $22,500 cash. $
3. $18,500 cash. $

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Colquhoun International purchases a warehouse for $301,000. The best estimate of the salvage value at the time of purchase was $16,000, and it is expected to be us for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determir that the warehouse will be useful for only another fifteen years. A. Calculate annual depreciation expense for the first four years. $ 171,000 B. Determine the depreciation expense for the final fifteen years of the asset's life. 11,400 X Feedback V Check My Work When revising deprecation schedules, the book value is used as the adjusting base to apply the new changes to when determine the revised yearly depreciation amount. C. Prepare the journal entry for year five. If an amount box does not require an entry, leave it blank. Depreciation Expense 171,000 X Accumulated Depreciation-Warehouse 171,000
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