Question

Adelphi Company purchased a machine on January 1, 2017, for $60,000. The machine was estimated to have a service life of ten years with an estimated residual value of $5,000. Adelphi sold the machine on January 1, 2021 for $21,000. Adelphi uses the double declining method for depreciation. Using this information, how much is the gain or (loss) for the equipment sale entry made on January 1, 2021. Enter a loss as a negative number.

Answer 1

-$3576

Explanation:

Depreciation using double declining method=100%/useful life*2

Depreciation using double declining method=100%/10*2=20%

2017 depreciation=$60,000*20%=$12000

2018 depreciation=($60,000-$12000)*20%=$9600

2019 depreciation=($60,000-$12000-$9600 )*20%=$7680

2020 depreciation=($60,000-$12000-$9600-$7680 )*20%=$6144

carrying value in 2021=$60000-$12000-$9600 -$7680-$6144 =$24576

Loss on disposal of machine=$21,000-$24576 =-$3576