To calculate the amount of additional depreciation expense that needs to be recognized in the year the equipment was sold, we first need to establish how much depreciation would have been recorded from January 1 until the sale date of October 1.
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Annual Depreciation: The annual depreciation expense is given as $12,000.
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Depreciation per Month: Since the company uses the straight-line method, we calculate the monthly depreciation by dividing the annual depreciation by 12 months: \[ \text{Monthly Depreciation} = \frac{\text{Annual Depreciation}}{12} = \frac{12,000}{12} = 1,000 \text{ per month} \]
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Number of Months Depreciated: From January 1 to October 1, there are 9 months.
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Total Depreciation for 9 Months: \[ \text{Total Depreciation} = \text{Monthly Depreciation} \times \text{Number of Months} = 1,000 \times 9 = 9,000 \]
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Book Value at Sale: The book value of the equipment at the time of sale can be determined as follows:
- Initial cost before depreciation is not provided, but if we consider the accumulated depreciation of $9,000 by the time of sale, we understand that the asset was depreciated down to whatever its book value was initially.
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Depreciation Adjustment: In the year sold, the company will need to adjust for the depreciation from January 1 to the sale date, which we've calculated to be $9,000.
Thus, the amount of adjustment that needs to be made for the additional depreciation expense in the year sold is $9,000.
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