Entries for Sale of Fixed Asset Equipment acquired on January 8 at a cost of $114,140 has an estimated useful life of 13 years, has an estimated residual value of $7,150, and is depreciated by the straight-line method. a. What was the book value of the equipment at December 31 the end of the fourth year? Book value is the initial cost of the fixed asset minus the accumulated depreciation. b. Assume that the equipment was sold on April 1 of the fifth year for $72,812. 1. Journalize the entry to record depreciation for the three months until the sale date. If an amount box does not require an entry, leave it blank. Round your answers to the nearest whole dollar if required. Depreciation Expense-Equipment Accumulated Depreciation-Equipment
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.
Entries for Sale of Fixed Asset
Equipment acquired on January 8 at a cost of $114,140 has an estimated useful life of 13 years, has an estimated residual value of $7,150, and is
a. What was the book value of the equipment at December 31 the end of the fourth year?
Book value is the initial cost of the fixed asset minus the
b. Assume that the equipment was sold on April 1 of the fifth year for $72,812.
1.
| Depreciation Expense-Equipment |
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| Accumulated Depreciation-Equipment |
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Straight-line method:- This method is used in amortization of the value of an asset into its number of useful life which is known as depreciation.
Assets get depreciated with the normal uses, hence these methods get used by the companies in order to minimize the loss.
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