Question

Oriole Company owns equipment that cost $62,000 when purchased on January 1, 2019. It has been depreciated using the straight-line method based on an estimated salvage value of $2,000 and an estimated useful life of 5 years.

Prepare Oriole Company’s journal entries to record the sale of the equipment in these four independent situations.

(a)		Sold for $28,000 on January 1, 2022.
(b)		Sold for $28,000 on May 1, 2022.
(c)		Sold for $7,000 on January 1, 2022.
(d)		Sold for $7,000 on October 1, 2022.

No.

Account Titles and Explanation

Debit

Credit

(a)(b)

(To record depreciation)

(To record sale of equipment)

(c)(d)

(To record depreciation)

(To record sale of equipment)

Answer 1

No Account Titles and Explanation Debit Credit Cash $28,000 $36,000 (a) Accumulated Depreciation - Equipment Equipmet Gain on sale of Equipment (To record sale of equipment $62,000 S 2,000 Depreciation Expenses Accumulated Depreciation - Equipment (To record depreciation) Cash Accumulated Depreciation - Equipment Equipmet Gain on sale of Equipment (To record sale of equipment) S 4,000 (b) S 4,000 $28,000 $40,000 $62,000 $ 6,000 Cash $ 7,000 (c) Accumulated Depreciation Equipment Loss on sale of equipment Equipmet (To record sale of equipment) $36,000 $19,000 $62,000

$ 9,000 Depreciation Expenses Accumulated Depreciation - Equipment (To record depreciation) Cash Accumulated Depreciation - Equipment Loss on sale of equipment Equipmet (To record sale of equipment) Working Notes: cost of equipment $62,000 Salvage Value $2,000 (d) 9,000 $ 7,000 $45,000 $10,000 $62,000 Useful Life 5 Years Depreciation (Cost of Equipment Salvage Value)Useful ife = (S62,000-$2,000)/5 = $12,000 (a) Accumulated Depreciation as on January 1,2022 $12,000*3 = $36,000 Gain on sale of Equipment $28,000+$36,000-$64,000 S2,000 Depreciation up to May 1,2022 S12,000*4/12 S4,000 (b) Accumulated DepreciationDepreciation up to May 1,2022 =$36,000+S4,000 = S40,000 Gain on sale of Equipment $28,000+$40,000-$64,000 S6,000 Loss on sale of Equipment = $62,000-$7,000-$36,000 = $19,000| (c) (d) Depreciation on Oct 1 = S12,000*9/12 = S9,000 Accumulated DepreciationDepreciation up toOct,2022 $36,000+$9,000 $45,000 Loss on sale of Equipment $62,000-$7,000-$45,000 = S10,000