Question

Equipment purchased for $85,000 on January 1, 2010, was sold on July 1, 2013 for $30,000. The company uses the straight-line method of computing depreciation, assuming a five year useful life and no salvage value. When recording the sale, the company should record a debit to Accumulated Depreciation for:
A) $51,000
B) $59,500
C) $68,000
D) Nothing; Accumulated Depreciation is not debited.
E) None of the above

Answer 1

Answer:

B) $59,500

Explanation:

The equipment was purchased for 85,000 and has no salvage value which means that all 85,000 will be depreciated over it lifetime. It has a life of 5 years and because it uses straight line method it means that it will depreciate equally each year. The equipment is bought on JAN 1 2010 and sold on July 1 2013 which means that the equipment is used for 3.5 years and in order to find its depreciation we will divide 3.5 by 5 and multiply it by 85,000.

3.5/5*85,000=59,500