Prepare Grace Company’s journal entries to record the sale of the equipment in these four independent situations. Update depreciation on assets disposed of at time of sale. (a) Sold for $40,000 on January 1, 2022. (b) Sold for $40,000 on April 1, 2022. (c) Sold for $15,000 on January 1, 2022. (d) Sold for $15,000 on September 1, 2022. (e) Repeat (a), assuming Grace uses double-declining balance depreciation. (f) Repeat (c), assuming Grace uses double-declining balance depreciation.
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.
Grace Company owns equipment that cost $70,000 when purchased on January 1, 2019. It has been
Instructions:
Prepare Grace Company’s
(a) Sold for $40,000 on January 1, 2022.
(b) Sold for $40,000 on April 1, 2022.
(c) Sold for $15,000 on January 1, 2022.
(d) Sold for $15,000 on September 1, 2022.
(e) Repeat (a), assuming Grace uses double-declining balance depreciation. (f) Repeat (c), assuming Grace uses double-declining balance depreciation.
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