Equipment acquired on January 6 at a cost of $360,550, has an estimated useful life of 12 years and an estimated residual value of $69,910.a. What was the annual amount of depreciation for Years 1-3 using the straight-line method of depreciation?Year 1 depreciation expense Year 2 depreciation expense Year 3 depreciation expense b. What was the book value of the equipment on January 1 of Year 3? CHART OF ACCOUNTS General Ledger ASSETS110Cash111Petty Cash112Accounts Receivable114Interest Receivable115Notes Receivable116Merchandise Inventory117Supplies119Prepaid Insurance120Land123Delivery Truck124Accumulated Depreciation-Delivery Truck125Equipment126Accumulated Depreciation-Equipment130Mineral Rights131Accumulated Depletion132Goodwill133Patents LIABILITIES210Accounts Payable211Salaries Payable213Sales Tax Payable214Interest Payable215Notes Payable EQUITY310Owner's Capital311Owner's Drawing REVENUE410Sales610Interest Revenue620Gain on Sale of Delivery Truck621Gain on Sale of Equipment EXPENSES510Cost of Merchandise Sold520Salaries Expense521Advertising Expense522Depreciation Expense-Delivery Truck523Delivery Expense524Repairs and Maintenance Expense529Selling Expenses531Rent Expense532Depreciation Expense-Equipment533Depletion Expense534Amortization Expense-Patents535Insurance Expense536Supplies Expense539Miscellaneous Expense710Interest Expense720Loss on Sale of Delivery Truck721Loss on Sale of EquipmentRequired: a. What was the annual amount of depreciation for Years 1-3 using the straight-line method of depreciation? b. What was the book value of the equipment on January 1 of Year 3? c. Assuming that the equipment was sold on January 3 of Year 4 for $272,570, journalize the entry to record the sale. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. d. Assuming that the equipment had been sold on January 3 of Year 4 for $303,490 instead of $272,570, journalize the entry to record the sale. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

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Description: Equipment acquired on January 6 at a cost of $360,550, has an estimated useful life of 12 years and an estimated residual value of $69,910.a. What was the annual amount of depreciation for Years 1-3 using the straight-line method of depreciation?Year

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Equipment acquired on January 6 at a cost of $360,550, has an estimated useful life of 12 years and an estimated residual value of $69,910.

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

Year 1 depreciation expense
Year 2 depreciation expense
Year 3 depreciation expense

b. What was the book value of the equipment on January 1 of Year 3?

CHART OF ACCOUNTS

General Ledger

	ASSETS
110	Cash
111	Petty Cash
112	Accounts Receivable
114	Interest Receivable
115	Notes Receivable
116	Merchandise Inventory
117	Supplies
119	Prepaid Insurance
120	Land
123	Delivery Truck
124	Accumulated Depreciation-Delivery Truck
125	Equipment
126	Accumulated Depreciation-Equipment
130	Mineral Rights
131	Accumulated Depletion
132	Goodwill
133	Patents

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Owner's Capital
311	Owner's Drawing

	REVENUE
410	Sales
610	Interest Revenue
620	Gain on Sale of Delivery Truck
621	Gain on Sale of Equipment

	EXPENSES
510	Cost of Merchandise Sold
520	Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Delivery Truck
523	Delivery Expense
524	Repairs and Maintenance Expense
529	Selling Expenses
531	Rent Expense
532	Depreciation Expense-Equipment
533	Depletion Expense
534	Amortization Expense-Patents
535	Insurance Expense
536	Supplies Expense
539	Miscellaneous Expense
710	Interest Expense
720	Loss on Sale of Delivery Truck
721	Loss on Sale of Equipment

Required:

	a. What was the annual amount of depreciation for Years 1-3 using the straight-line method of depreciation?
	b. What was the book value of the equipment on January 1 of Year 3?
	c. Assuming that the equipment was sold on January 3 of Year 4 for $272,570, journalize the entry to record the sale. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
	d. Assuming that the equipment had been sold on January 3 of Year 4 for $303,490 instead of $272,570, journalize the entry to record the sale. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

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