Five skid steers costing $20,000 each were purchased by the Biggs Excavating Company at the beginning of 2014. Biggs capitalized the skid steers in a single asset account and depreciates them using the group method. Each skid steer was expected to have a residual value of $6,000 in four years. At the end of 2017, Biggs sold one skid steer for $8,000. For what amount is accumulated depreciation debited in the journal entry to record the disposal of that skid steer?

Question

Quizplus · Accepted Answer

The accumulated depreciation for the sold skid steer at the end of the third year can be calculated as follows:
Depreciation per year = (Purchase cost - Residual value) / Useful life in years
= ($20,000 - $6,000) / 4
= $3,500 per year
Accumulated Depreciation at the end of the third year = Depreciation per year x number of years
= $3,500 x 3
= $10,500
So, accumulated depreciation debited in the journal entry to record the disposal of that skid steer would be $10,500.

Five Skid Steers Costing $20,000 Each Were Purchased by the Biggs