Equipment Was Acquired at the Beginning of the Year at a Cost

question 208

Essay

Equipment was acquired at the beginning of the year at a cost of $75,000. The equipment was depreciated using the straight-line method based on an estimated useful life of six years and an estimated residual value of $7,500.
(a)What was the depreciation expense for the first year?
(b)Assuming the equipment was sold at the end of the second year for $59,000, determine the gain or loss on sale of the equipment.
(c)Journalize the entry to record the sale.

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Definitions:

Total Asset Turnover

A financial metric that measures the efficiency of a company's use of its assets in generating sales revenue.

Inventory Turnover

An index that measures how often a firm's inventory is sold out and resupplied over a set period.

Debt Ratio

A financial ratio that measures the proportion of a company's total debt to its total assets, indicating leverage and financial health.

Days' Sales in Inventory

A financial metric that indicates the average time in days that a company takes to turn its inventory into sales.