Jamison Industries disposed of two pieces of equipment in 2017. When they disposed of the first piece of equipment, they did not subtract a partial year of depreciation from the book value. However, when they disposed of the second piece of equipment, they did subtract a partial year of depreciation from the book value. Why did their calculation of book value differ for these two pieces of equipment?

Question

Business

Brooks Forbes

28 August, 19:17

Jamison Industries disposed of two pieces of equipment in 2017. When they disposed of the first piece of equipment, they did not subtract a partial year of depreciation from the book value. However, when they disposed of the second piece of equipment, they did subtract a partial year of depreciation from the book value. Why did their calculation of book value differ for these two pieces of equipment?

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Alyson Jefferson · Answer 1

The calculation of book value differ in case of these two equipment because of difference in time of disposal.

Explanation:

The first equipment must have been sold at the beginning of fiscal year. because at the beginning of fiscal year there is no need to subtract depreciation from the book value.

The second piece of equipment must have been sold at some time other than the beginning of fiscal year. That's why depreciation needs to be deducted from the book value.