Equipment acquired on January 1, 2006, is sold on June 30, 2009, for $11,200. The equipment cost $26,800, had an estimated residual value of $6,800, and an estimated useful life of 5 years. The company prepared financial statements on December 31, and the equipment has been depreciated using the straight- line method. Prior to determining the gain or loss on the sale of this equipment, the company should record depreciation of:

Question

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The equipment is depreciated using the straight-line method. Annual depreciation is calculated as (Cost - Residual Value) / Useful Life = ($26,800 - $6,800) / 5 = $4,000 per year. Since the equipment is sold on June 30, 2009, half a year's depreciation for 2009 needs to be recorded, which is $4,000 / 2 = $2,000.

Equipment Acquired on January 1, 2006, Is Sold on June