Homework Answers
Entry for sale of equipment
Depreciation = 70000 - 6000 / 8 = 8000 per year
1) cash received 40000
Accumulated Depreciation balance at the end of 4th year = 8000 x 4 = 32000
Book Value = 70000 - 32000 = 38000
Gain = 2000 ( since cash received = 40000 and book value 38000)
Cash Account Dr 40000
Accumulated Depreciation Account Dr 32000
To Asset Account 70000
To Gain on Sale of Asset Account 2000 (Balancing Figure)
2) cash received 17000
Accumulated Depreciation balance at the end of 6th year = 8000 x 6 = 48000
Book Value = 70000 - 48000 = 22000
Loss = 2000 ( since cash received = 17000 and book value 22000)
Cash Account Dr 17000
Accumulated Depreciation Account Dr 48000
Loss on sale of asset Account Dr 5000 (balancing figure)
To Asset Account 70000
Cash Account will be debited in every case ,accumulated depreciation will be reversed with the depreciation , asset account will be credited because asset is sold ,gain /loss will be balancing figure.
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