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Adelphi Company purchased a machine on January 1, 2017, for $50,000. The machine was estimated to...

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Accounting

Adelphi Company purchased a machine on January 1, 2017, for$50,000. The machine was estimated to have a service life of tenyears with an estimated residual value of $5,000. Adelphi sold themachine on January 1, 2021 for $24,000. Adelphi uses the doubledeclining method for depreciation. Using this information, how muchis the gain or (loss) for the equipment sale entry made on January1, 2021. Enter a loss as a negative number.

Answer & Explanation Solved by verified expert
3.9 Ratings (573 Votes)

Cost $         50,000.00
Accumulated depreciation $         29,520.00
Book value $         20,480.00
Sales price   $         24,000.00
Book value $         20,480.00
Gain /(loss) $           3,520.00

Gain on sale = $3,520

.

Working

Double declining Method
A Cost $        50,000.00
B Residual Value $           5,000.00
C=A - B Depreciable base $        45,000.00
D Life [in years] 10
E=C/D Annual SLM depreciation $           4,500.00
F=E/C SLM Rate 10.00%
G=F x 2 DDB Rate 20.00%
Year Beginning Book Value Depreciation rate Depreciation expense Ending Book Value Accumulated Depreciation
2017 $      50,000.00 20.00% $      10,000.00 $      40,000.00 $      10,000.00
2018 $      40,000.00 20.00% $         8,000.00 $      32,000.00 $      18,000.00
2019 $      32,000.00 20.00% $         6,400.00 $      25,600.00 $      24,400.00
2020 $      25,600.00 20.00% $         5,120.00 $      20,480.00 $      29,520.00

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