PE 10-6A Sale of equipment

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.

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.


Answer:
a. $28,000 [($465,000 – $45,000) ÷ 15]
b. $6,000 loss {$235,000 – [$465,000 – ($28,000 × 8)]}


c. Cash 235,000
Accumulated Depreciation—Equipment 224,000
Loss on Sale of Equipment 6,000
Equipment 465,000