Terms and Definitions
A fixed asset may be sold before or after the asset is fully depreciated. If the selling price of a fixed asset is more than the asset’s book value, a is recorded. Any gain or loss on the sale of a fixed asset is recognized on the in the period in which the asset is sold.
Understanding the Business Transaction
A fixed asset is sold when a company .
Coburn Company purchases equipment on January 1, 20×1 with the following information:
Understanding the Business Transaction
A fixed asset is sold when a company .
Coburn Company purchases equipment on January 1, 20×1 with the following information:
|
Initial cost |
|
$112,300 |
|
Expected useful life |
|
10 |
|
Estimated residual value |
|
2,300 |
|
Depreciation Method |
|
Straight Line |
On January 1, 20×4, Coburn sells the equipment for cash of $88,180. Calculate the following information related to Coburn’s equipment on the date of sale.
Recording in the Accounting System
Prepare the journal entry to record the sale of the equipment by Coburn on January 1, 20×4:
If an amount box does not require an entry, leave it blank.
Financial Statement Impact
Bradshaw Company purchases equipment on January 1, 20×1. The following information relates to this equipment:
|
Initial cost |
$200,000 |
|
Expected useful life |
5 |
|
Estimated residual value |
25,000 |
|
Depreciation Method |
Straight Line |
Bradshaw sells the asset for cash. Use the sliders to select the asset’s age and selling price to answer the following questions.
|
1. |
What is the gain (loss) on sale if the asset is sold on December 31, 20×2 for $140,000? |
|
2. |
What is the gain (loss) on sale, if the asset is sold on December 31, 20×4 for $80,000? |
|
3. |
If the age of the equipment remains the same and the selling price increases, the amount of any gain will , or the amount of any loss will . |
|
4. |
If the selling price remains the same, and the age of the equipment increases, the amount of any gain will , or the amount of any loss will . |
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. If an amount box does not require an entry, leave it blank.
Entries for Sale of Fixed Asset
Equipment acquired on January 5, 2011, at a cost of $772,200, has an estimated useful life of 12 years, has an estimated residual value of $63,720, and is depreciated by thestraight-line method.
a. What was the book value of the equipment at December 31, 2014, the end of the year?
b. Assume that the equipment was sold on April 1, 2015, for $479,600.
Journalize the entry to record depreciation for the three months until the sale date.
2. Journalize the entry to record the sale of the equipment. If an amount box does not require an entry, leave it blank. Do not round intermediate calculations.
Sale of Equipment
Equipment was acquired at the beginning of the year at a cost of $37,750. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of five years and an estimated residual value of $730.
a. What was the depreciation for the first year?
b. Assuming the equipment was sold at the end of year 3 for $8,400, determine the gain or loss on the sale of the equipment.
c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
Disposal of Fixed Asset
Equipment acquired on January 6, 2011, at a cost of $714,000, has an estimated useful life of 12 years and an estimated residual value of $44,400.
a. What was the annual amount of depreciation for the years 2011, 2012, and 2013, using the straight-line method of depreciation?
|
Year |
Depreciation Expense |
b. What was the book value of the equipment on January 1, 2014?
c. Assuming that the equipment was sold on January 3, 2014, for $525,000, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
d. Assuming that the equipment had been sold on January 3, 2014, for $560,000 instead of $525,000, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
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