New Deli is in the process of closing its operations. It sold its three-year-old ovens to Sicily Pizza for $341,000. The ovens originally cost $455,000, had an estimated service life of 10 years, had an estimated residual value of $30,000, and were depreciated using straight-line depreciation. Complete the requirements below for New Deli.Required:1. Calculate the balance in the Accumulated Depreciation account at the end of the third year.2. Calculate the book value of the ovens at the end of the third year.3. What is the gain or loss on the sale of the ovens at the end of the third year?4. Record the sale of the ovens at the end of the third year.
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.
New Deli is in the process of closing its operations. It sold its three-year-old ovens to Sicily Pizza for $341,000. The ovens originally cost $455,000, had an estimated service life of 10 years, had an estimated residual value of $30,000, and were
Required:
1. Calculate the balance in the
2. Calculate the book value of the ovens at the end of the third year.
3. What is the gain or loss on the sale of the ovens at the end of the third year?
4. Record the sale of the ovens at the end of the third year.
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