Equipment Acquired on January 2,Year 1,at a Cost of $525,000

question 42

Essay

Equipment acquired on January 2,Year 1,at a cost of $525,000 has an estimated useful life of eight years and an estimated residual value of $45,000.
Required:
1 What is the annual amount of depreciation for the first three years,assuming the straight-line method of depreciation is used?
2 What is the book value of the equipment on January 1,Year 4?
3 Assuming that the equipment is sold on January 2,Year 4,for $326,000,journalize the entry to record the sale.
4 Assuming that the equipment is sold on January 2,Year 4,for $394,000 instead of
$168,500,journalize the entry to record the sale.

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Definitions:

Industry

A collection of businesses and companies that produce similar goods or offer similar services within an economic sector.

Invisible Hand

A metaphor coined by Adam Smith to describe how individuals pursuing their self-interest unwittingly contribute to the economic prosperity of society.

Market System

An economic approach wherein the processes of investment, manufacturing, and goods distribution are directed by supply-demand correlation, with a system that freely sets the prices of goods and services.

Prices

The amount of money required to purchase goods or services, indicating the value that consumers are willing to pay and sellers are willing to accept.