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Equipment was acquired at the beginning of the year at a cost of$35,000. The equipment was depreciated using the A method ofdepreciation that provides periodic depreciation expense based onthe declining book value of a fixed asset over its estimatedlife.double-declining-balance method based on an estimated usefullife of ten years and an estimated The estimated value of a fixedasset at the end of its useful life.residual value of $680.

a. What was the The systematic periodictransfer of the cost of a fixed asset to an expense account duringits expected useful life.depreciation for the first year?
$

b. Assuming the equipment was sold at the endof year 2 for $8,090, determine the gain or loss on the sale of theequipment.
$ Loss

• Gain
• Loss

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Book value is the asset cost minus accumulated depreciation. Inthe first year, the balance in the accumulated depreciation accountis zero.

Compare the book value to the sale price. If the book value ismore than the sale price, the equipment was sold for a loss. If thebook value is less than the sale price, the equipment was sold fora gain.

Learning Objective 3.

c. Journalize the entry to record the sale. Ifan amount box does not require an entry, leave it blank.

	Cash Accounts Payable Accounts Receivable Cash Depreciation Expense Equipment Gain on Sale of Equipment
	Accumulated Depreciation-Equipment Accounts Payable Accounts Receivable Accumulated Depreciation-Equipment Depreciation Expense Equipment Gain on Sale of Equipment
	Loss on Sale of Equipment Accounts Payable Accounts Receivable Depreciation Payable Depreciation Expense Loss on Sale of Equipment
	Equipment Accounts Payable Accounts Receivable Accumulated Depreciation-Equipment Depreciation Expense Equipment Loss on Sale of Equipment