Question

Computer equipment (office equipment) purchased 6 1/2 years ago for $170,000, with an estimated life of 8 years and a residual value of $10,000, is now sold for $60,000 cash. (Appropriate entries for depreciation had been made for the first six years of use.) Journalize the following entries:______. A) Record the depreciation for the one-half year prior to the sale, using the straight-line method.
B) Record the sale of the equipment.
C) Assuming that the equipment had been sold for $25,000 cash, prepare the entry for (b) above to record the sale.

Answer 1

Answer:

depreciation expense 10,000 debit

      acc dep office equipment   10,000 credit

If sold at 40,000 dollars

acc dep office equipment 130,000 debit

cash                                     60,000 debit

   office equipment                170,000 credit

   gain at disposal                   20,000 credit

If sold at 25,000 dollars

acc dep office equipment 130,000 debit

cash                                     25,000 debit

loss at disposal                    15,000 credit

   office equipment                170,000 credit

Explanation:

depreciation expense using straight line method

(cost - salvage value) / useful life = depreciation expense

(170,000 - 10,000) / 8 = 20,000

half year depreciation: 20,000 x 1/2 = 10,000

book value:

170,000 - 6.5 year of depreciation

170,000 x 6.5 x 20,000 = 40,000

sales price: 60,000

gain = 20,000

if sold at 25,000 then:

25,000 - 40,000 0 -15,000 there will be a loss at disposal