Equipment acquired on January 6 at a cost of $375,000 has an estimated useful life of 20 years and an estimated residual value of $25,000.a. What was the annual amount of depreciation for the Years 1–3 using the straight-line method of depreciation?b. What was the book value of the equipment on January 1 of Year 4?c. Assuming that the equipment was sold on January 3 of Year 4 for $300,000, journalize the entry to record the sale.d. Assuming that the equipment had been sold on January 3 of Year 4 for $325,000 instead of $300,000, journalize the entry to record the sale.
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.
Equipment acquired on January 6 at a cost of $375,000 has an estimated useful life of 20 years and an estimated residual value of $25,000.
a. What was the annual amount of
b. What was the book value of the equipment on January 1 of Year 4?
c. Assuming that the equipment was sold on January 3 of Year 4 for $300,000,
d. Assuming that the equipment had been sold on January 3 of Year 4 for $325,000 instead of $300,000, journalize the entry to record the sale.
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