### Depreciation Expense Calculation ExampleEquipment was acquired at the beginning of the year at a cost of $79,680. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,980.#### Required:a. **What was the depreciation expense for the first year?**b. **Assuming the equipment was sold at the end of the second year for $60,242, determine the gain or loss on sale of the equipment.**c. **Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles.**### Explanation:**Depreciation Calculation:**- Cost of Equipment: $79,680- Residual Value: $7,980- Useful Life: 6 years- Straight-Line Depreciation Method**Depreciation Expense:**1. Subtract the residual value from the cost of the equipment: \[ $79,680 - $7,980 = $71,700 \]2. Divide the depreciable amount by the useful life of the equipment: \[ $71,700 \div 6 \text{ years} = $11,950 \text{ per year} \]Thus, the depreciation expense for the first year is $11,950.**Gain or Loss on Sale at the End of Second Year:**1. Calculate the accumulated depreciation for two years: \[ 2 \times $11,950 = $23,900 \]2. Subtract the accumulated depreciation from the cost of the equipment to find the book value at the end of the second year: \[ $79,680 - $23,900 = $55,780 \]3. Compare the sale price with the book value: \[ \text{Sale Price} = $60,242 \] \[ \text{Book Value} = $55,780 \] \[ \text{Gain} = $60,242 - $55,780 = $4,462 \]So, there is a gain of $4,462 on the sale of the equipment.**Journal Entry:**- Record the sale: - Debit: Cash $60,242 - Debit: Accumulated Dep ### Depreciation and Sale of Equipment Exercise#### Part a: Depreciation Calculations- **Question**: What was the depreciation expense for the first year?- **Input Box**: Provide your answer in the box labeled as "Depreciation expense" with a dollar sign ($) preceding the amount.#### Part b: Determining Gain or Loss on Sale- **Question**: Assuming the equipment was sold at the end of the second year for $60,242, determine the gain or loss on sale of the equipment.- **Input Box**: Provide the sale price in the box labeled as "Sale of the equipment" with a dollar sign ($) preceding the amount.- **Dropdown Menu**: Select the appropriate option to indicate whether there was a gain or loss as a result of the sale.

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Description: ### Depreciation Expense Calculation ExampleEquipment was acquired at the beginning of the year at a cost of $79,680. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residu

Depreciation is a reduction of value of asset over a period of time due to wear and tear,…

Business

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Equipment was acquired at the beginning of the year at a cost of $79,680. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,980. Required: a. What was the depreciation expense for the first year? b. Assuming the equipment was sold at the end of the second year for $60,242, determine the gain or loss on sale of the equipment. C. Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles.

Equipment was acquired at the beginning of the year at a cost of $79,680. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,980. Required: a. What was the depreciation expense for the first year? b. Assuming the equipment was sold at the end of the second year for $60,242, determine the gain or loss on sale of the equipment. C. Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles.

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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