Five skid steers costing $20,000 each were purchased by the Biggs Excavating Company at the beginning of 2016. 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 2019, 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 each skid steer is calculated as the cost minus the residual value divided by the useful life. ($20,000 - $6,000) / 4 years = $3,500 per year. Over four years, the accumulated depreciation is $3,500 * 4 = $14,000. However, since the skid steer was sold at the end of 2019, it was depreciated for four years, so the accumulated depreciation is $14,000.

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