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Adelphi Company purchased a machine on January 1, 2017, for $70,000. The machine was estimated to...

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Accounting

Adelphi Company purchased a machine on January 1, 2017, for$70,000. The machine was estimated to have a service life of tenyears with an estimated residual value of $5,000. Adelphi sold themachine on January 1, 2021 for $28,000. Adelphi uses the doubledeclining method for depreciation. Using this information, how muchis the gain or (loss) for the equipment sale entry made on January1, 2021. Enter a loss as a negative number.

Answer & Explanation Solved by verified expert
4.3 Ratings (776 Votes)

Loss on sale = $-672

Cost $         70,000.00
Accumulated depreciation $         41,328.00
Book value $         28,672.00
Sales price   $         28,000.00
Book value (at the end of dec 31 2020) $         28,672.00
Gain /(loss) $            (672.00)

Working

Double declining Method
A Cost $        70,000.00
B Residual Value $           5,000.00
C=A - B Depreciable base $        65,000.00
D Life [in years] 10
E=C/D Annual SLM depreciation $           6,500.00
F=E/C SLM Rate 10.00%
G=F x 2 DDB Rate 20.00%
Year Beginning Book Value Depreciation rate Depreciation expense Ending Book Value Accumulated Depreciation
2017 $      70,000.00 20.00% $      14,000.00 $      56,000.00 $      14,000.00
2018 $      56,000.00 20.00% $      11,200.00 $      44,800.00 $      25,200.00
2019 $      44,800.00 20.00% $         8,960.00 $      35,840.00 $      34,160.00
2020 $      35,840.00 20.00% $         7,168.00 $      28,672.00 $      41,328.00

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