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Equipment with a useful life of 5 years and a residual value of $6,000 was purchased on

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Equipment with a useful life of 5 years and a residual value of $6,000 was purchased on January 3, 2002 for $48,500. The machine was sold on January 5, 2007 for $13,000.

(a) What is the book value of the machine on January 5, 2007 assuming that straight-line depreciation is used?

(b) Illustrate the effects on the accounts and financial statements of the sale of the machine on January 5, 2007.

(c) Illustrate the effects on the accounts and financial statements of the sale of the machine if it had been sold for $18,000 instead.


Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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a Computation of the Book Value of the Machine on January 5 2007 Given information E...View the full answer


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Intermediate accounting

Intermediate accounting

ISBN: 978-0077647094

7th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson

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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

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