Problem -
Equipment was acquired at the beginning of the year at a cost of $465,000. The equipment was depreciated using the straight-line method based on an estimated useful life of 15 years and an estimated residual value of $45,000.
Required:
A. What was the depreciation for the first year?
B. Assuming the equipment was sold at the end of the eighth year for $235,000, determine the gain or loss on the sale of the equipment.
C. Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS
ASSETS LIABILITIES
- 110Cash 210Accounts Payable
- 111Petty Cash 211Salaries Payable
- 213Sales Tax Payable
- 112Accounts Receivable 214Interest Payable
- 114Interest Receivable 215Notes Payable
- 115Notes Receivable
- 116Merchandise Inventory
- 117Supplies REVENUE
- 119Prepaid Insurance 410Sales
- 120Land 610Interest Revenue
- 123Delivery Truck 620Gain on Sale of Delivery Truck
- 124Accumulated Depreciation-Delivery Truck 621Gain on Sale of Equipment
- 125Equipment
- 126Accumulated Depreciation-Equipment
- 130Mineral Rights
- 131Accumulated Depletion
- 132Goodwill
- 133Patents
EQUITY
- 310Owner, Capital
- 311Owner, Drawing
- 312Income Summary
EXPENSES
- 510Cost of Merchandise Sold
- 520Salaries Expense
- 521Advertising Expense
- 522Depreciation Expense-Delivery Truck
- 523Delivery Expense
- 524Repairs and Maintenance Expense
- 529Selling Expenses
- 531Rent Expense
- 532Depreciation Expense-Equipment
- 533Depletion Expense
- 534Amortization Expense-Patents
- 535Insurance Expense
- 536Supplies Expense
- 539Miscellaneous Expense
- 710Interest Expense
- 720Loss on Sale of Delivery Truck
- 721Loss on Sale of Equipment