For Each of the Following Three Independent Situations Determine the Gain

Essay

For each of the following three independent situations determine the gain or loss on the sale or disposal of the asset. Prepare the journal entry required at the time of sale or disposal. Assume that all assets are depreciated using the straight-line method and in every case, a year-end of December 31. 1. Equipment purchased July 1, 20X4, for $75,000 was sold for $9,500 on June 30, 20X9. At the time of purchase, it was estimated to have a $5,000 residual value and a five-year useful life. Assume that a half-year depreciation is taken in the year the equipment was acquired and in the year it was sold. 2 Calibrating equipment was purchased on July 10 , 20X8, for $120,000. At the time, it was estimated to have a six-year useful life and no residual value. On September 30, 20X9, there was a fire in the plant, and the equipment suffered water damage and is beyond repair. The company received $50,000 from the insurance company for the equipment. Assume depreciation is applied monthly. 3. Office furniture was purchased on February 11, 20X0 for $25, 000 and was estimated to have a useful life of ten years and a salvage value of$2,500. On August 1, 20X7, the company moved to new offices and donated the old furniture to charity. Assume that a half-year depreciation is taken in the year the furniture was acquired and in the year it was donated.