Wilson Engineering purchased a depreciable asset costing $45,000 on January 1, Year 1. The asset is estimated to have a residual value of $5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the asset is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include:

Question

Quizplus · Accepted Answer

The accumulated depreciation by July 1, Year 5 is calculated as follows: Annual depreciation = ($45,000 - $5,000) / 8 = $5,000. Depreciation for 4.5 years = $5,000 * 4.5 = $22,500. Therefore, the journal entry will include a debit to accumulated depreciation for $22,500.

Wilson Engineering Purchased a Depreciable Asset Costing $45,000 on January