Depreciation : It refers to the reduction in the monetary value of the fixed tangible assets over its useful life due to its wear and tear or obsolescence. In other words, it is the method of distributing the cost of tangible fixed assets over its estimated useful life. Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the salvage value is shown as below: Depreciation cost = ( Cost of the asset − Salvage value ) Estimated useful life of the asset To record: the journal entry for the purchase of equipment on January 1.

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Chapter 9, Problem 9.12E

(a)

To determine

Depreciation: It refers to the reduction in the monetary value of the fixed tangible assets over its useful life due to its wear and tear or obsolescence. In other words, it is the method of distributing the cost of tangible fixed assets over its estimated useful life.

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the salvage value is shown as below:

Depreciation cost = (Cost of the asset−Salvage value)Estimated useful life of the asset

To record: the journal entry for the purchase of equipment on January 1.

(b)

To determine

To record: the journal entry for the depreciation expense for the equipment sold on June 30, 2017

(c)

To determine

To record: the journal entry for the sale of Equipment on December 31.

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