On April, 1, 2012, Lowery Food Market purchased equipment that cost $27,000. The company expects to use the equipment for 5 years and the expected residual value is $2,000 at the end of the useful life. The company uses straight line depreciation for the equipment. On June, 30, 2014 the company sold the equipment for $10,000. Requirement: a. Make the journal entries for depreciation expense on December 31, 2012. b. Make the journal entries for depreciation expense on December 31, 2013. c. Make the journal entries for the sale of equipment on June 30, 2014
On April, 1, 2012, Lowery Food Market purchased equipment that cost $27,000. The company expects to use the equipment for 5 years and the expected residual value is $2,000 at the end of the useful life. The company uses straight line depreciation for the equipment. On June, 30, 2014 the company sold the equipment for $10,000. Requirement: a. Make the journal entries for depreciation expense on December 31, 2012. b. Make the journal entries for depreciation expense on December 31, 2013. c. Make the journal entries for the sale of equipment on June 30, 2014
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Transcribed Image Text:On April, 1, 2012, Lowery Food Market purchased equipment that cost $22,000. The company expects
to use the equipment for 5 years and the expected residual value is $2,000 at the end of the useful life.
The company uses straight line depreciation for the equipment. On June, 30, 2014 the company sold
the equipment for $10,000.
Requirement:
a. Make the journal entries for depreciation expense on December 31, 2012.
b. Make the journal entries for depreciation expense on December 31, 2013.
c. Make the journal entries for the sale of equipment on June 30, 2014
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