Falcetto Company acquired equipment on January 1, 2011, for $12,000. Falcetto elects to value this class of equipment using revaluation accounting. This equipment is being depreciated on a straight-line basis over its 6-year useful life. There is no residual value at the end of the 6-year period. The appraised value of the equipment approximates the carrying amount at December 31, 2011 and 2013. On December 31, 2012, the fair value of the equipment is determined to be $7,000.
Instructions
(a) Prepare the journal entries for 2011 related to the equipment.
(b) Prepare the journal entries for 2012 related to the equipment.
(c) Determine the amount of depreciation expense that Falcetto will record on the equipment in 2013.