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lubasha [3.4K]
3 years ago
7

Downs Tax Planning Service bought communications equipment for $9,600 on January 1, 2017. It has an estimated useful life of fiv

e years and zero residual value. Downs uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month. As of June 30, 2017, the balance in the Accumulated Depreciation account for this equipment is ________.
Business
1 answer:
MaRussiya [10]3 years ago
3 0

Answer:

$960

Explanation:

For computing the accumulated depreciation, first we have to compute the depreciation expense which is shown below:

= (Original cost - residual value) ÷ (useful life)

= ($9,600 - $0) ÷ (5 years)

= ($9,600) ÷ (5 years)  

= $1,920

This is a full year depreciation but we have to find out for June 30,2017 i.e 6 months

= $1,920 ÷ 12 months × 6 months

= $960

The same is recorded as an accumulated depreciation

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Answer:

C. Loss of $800

Explanation:

Given that

Purchase price = 14400

Depreciation = 8000

Selling price = 5600

Thus,

Value of asset after depreciation = Purchase price - Depreciation

= 14400 - 8000

= 6400.

Therefore,

Difference between current value and price sold = value of asset after depreciation - selling price

= 6400 - 5600

= 800

Therefore, there was a loss of $800, since the selling price is less than the value of asset after depreciation.

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