Question

Sunland Company sells office equipment on July 31, 2017, for $23,830 cash. The office equipment originally cost $79,860 and as of January 1, 2017, had accumulated depreciation of $39,690. Depreciation for the first 7 months of 2017 is $4,090. Prepare a tabular summary to (a) update depreciation to July 31, 2017, and (b) record the sale of the equipment. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.) Assets = Liabilities + Stockholders' Equity Retained Earnings Cash Equipment . Accum. Depr. - Equip. Common Stock Revenue - Expense - Dividend Bal. $ i $ 79,860 $ 39,690 Depreciation expense 23,830 23,830 43780 39,690 Loss on disposal

Answer 1

Solution:

1. Computation of Accumulated Depreciation as on 31/7/2017

Accumulated Depreciation as on 1/1/2017 Add: Depreciation from 1/1/2017 to 31/7/2017	$ 39,690 4,090
Accumulated Depreciation as on 31/7/2017	43,780

1. Computation of Profit/ Loss on sale of Equipment

Original Cost of Equipment on date of purchase Less: Accumulated Depreciation as on 31/7/2017 (From above)	$ 79,860 (43,780)
Book Value of Equipment as on 31/7/2017 Less: Selling Price	36,080 (23,830)
Loss on Sale of Equipment	12,250

Effect of above transaction on Accounting Equation

Assets					=	Retained Earnings
Cash	+	Equipment	–	Accu. Dep	=	Revenue	–	Expense	Dividend
23,830	+	(79,860)	–	(43,780)			–	(12,250)