Allyn Company purchased equipment costing $55,000 on January 1,Year 1.The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 5 years.Double-declining-depreciation is used,and all depreciation has been recorded as of December 31,Year 2.If the equipment is sold on December 31,Year 2 for $15,000,the journal entry to record the sale is:

Question

Quizplus · Accepted Answer

The correct calculation for double-declining depreciation for the first year is ($55,000 * 2/5) = $22,000, and for the second year, it's on the new book value ($55,000 - $22,000) * 2/5 = $13,200. Total depreciation over two years is $22,000 + $13,200 = $35,200. The book value at the end of Year 2 is $55,000 (cost) - $35,200 (accumulated depreciation) = $19,800. Selling the equipment for $15,000 results in a loss of $4,800 ($19,800 book value - $15,000 sale price).

Allyn Company Purchased Equipment Costing $55,000 on January 1,Year 1