Disposal of Fixed Asset Equipment acquired on January 6 at a cost of $276,000 has an estimated useful life of 8 years and an estimated residual value of $36,000. a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation? Year Depreciation Expense Year 1 $fill in the blank 3a305c045f95fb6_1 Year 2 $fill in the blank 3a305c045f95fb6_2 Year 3 $fill in the blank 3a305c045f95fb6_3 b. What was the book value of the equipment on January 1 of Year 4? $fill in the blank 3a305c045f95fb6_4 Feedback Asset cost minus residual value equals depreciable cost. Asset cost minus accumulated depreciation equals book value. The Accumulated Depreciation account is a permanent account and therefore the balance in the account grows each year of the asset's life. c. Assuming that the equipment was sold on January 3 of Year 4 for $176,700, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank. Jan. 3 Cash Cash Accumulated Depreciation-Equipment Accumulated Depreciation-Equipment Loss on Sale of Equipment Loss on Sale of Equipment Equipment Equipment Feedback Compare the book value amount to the sale price. If the book value is less than the sale price, the asset was sold for a gain. If the book value is more than the sale price, the equipment was sold for a loss. d. Assuming that the equipment had been sold on January 3 of Year 4 for $189,700 instead of $176,700, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank. Jan. 3 Cash Cash Accumulated Depreciation-Equipment Accumulated Depreciation-Equipment Equipment Equipment Gain on Sale of Equipment Gain on Sale of Equipment

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Disposal of Fixed Asset

Equipment acquired on January 6 at a cost of $276,000 has an estimated useful life of 8 years and an estimated residual value of $36,000.

a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation?

Year	Depreciation Expense
Year 1	$fill in the blank 3a305c045f95fb6_1
Year 2	$fill in the blank 3a305c045f95fb6_2
Year 3	$fill in the blank 3a305c045f95fb6_3

b. What was the book value of the equipment on January 1 of Year 4?
$fill in the blank 3a305c045f95fb6_4

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Asset cost minus residual value equals depreciable cost.

Asset cost minus accumulated depreciation equals book value. The Accumulated Depreciation account is a permanent account and therefore the balance in the account grows each year of the asset's life.

c. Assuming that the equipment was sold on January 3 of Year 4 for $176,700, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Jan. 3	Cash	Cash
	Accumulated Depreciation-Equipment	Accumulated Depreciation-Equipment
	Loss on Sale of Equipment	Loss on Sale of Equipment
	Equipment	Equipment

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Compare the book value amount to the sale price. If the book value is less than the sale price, the asset was sold for a gain. If the book value is more than the sale price, the equipment was sold for a loss.

d. Assuming that the equipment had been sold on January 3 of Year 4 for $189,700 instead of $176,700, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Jan. 3	Cash	Cash
	Accumulated Depreciation-Equipment	Accumulated Depreciation-Equipment
	Equipment	Equipment
	Gain on Sale of Equipment	Gain on Sale of Equipment

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