Question 10.6: Sale of Equipment Equipment was acquired at the beginning of......
Sale of Equipment
Equipment was acquired at the beginning of the year at a cost of $91,000. The equipment was depreciated using the straight-line method based on an estimated useful life of nine years and an estimated residual value of $10,000.
a. What was the depreciation for the first year?
b. Assuming the equipment was sold at the end of the second year for $78,000, determine the gain or loss on sale of the equipment.
c. Journalize the entry to record the sale.
a. $9,000 [($91,000 − $10,000)/9]
b. $5,000 gain {$78,000 − [$91,000 − ($9,000 × 2)]}
c. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,000
Accumulated Depreciation—Equipment . . . . . 18,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,000
Gain on Sale of Equipment . . . . . . . . . . . . . . 5,000