XYZ Ltd. purchased a piece of equipment on January 1, 2018, for $80,000. The equipment has an
Question:
XYZ Ltd. purchased a piece of equipment on January 1, 2018, for $80,000. The equipment has an estimated useful life of 10 years and a residual value of $8,000. The company uses the straight-line depreciation method to allocate the cost of the equipment to expense over its useful life. On December 31, 2020, the company sold the equipment for $50,000.
a) Calculate the annual depreciation expense for the equipment
b) Prepare the journal entry to record the sale of the equipment
c) Calculate the gain or loss on sale of the equipment
d) Prepare the journal entry to record the gain or loss on sale of the equipment
Assume that the company uses a calendar year for financial reporting and that it records depreciation expense at the end of each year.
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson