Question

Ayayai Manufacturing has old equipment that cost $49,000. The equipment has accumulated depreciation of $27,000. Ayayai has decided to sell the equipment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(a)		What entry would Ayayai make to record the sale of the equipment for $26,000 cash?
(b)		What entry would Ayayai make to record the sale of the equipment for $15,000 cash?

Answer 1

Description	Scenario-1	Scenario-2
Cost of equipment	$    49,000.00	$        49,000.00
Less Accumulated depreciation	$   (27,000.00)	$      (27,000.00)
WDV	$    22,000.00	$        22,000.00
Selling price	$    26,000.00	$        15,000.00
Gain/(Loss)	$      4,000.00	$        (7,000.00)
Journal entries
Situation A
Bank a/c                                     Dr	$    26,000.00
Accumulated depreciation     Dr	$    27,000.00
To Equipment		$        49,000.00
To Gain on sale of equipment		$          4,000.00
(Being equipment sold at a profit of $ 4,000)
Situation B
Bank a/c                                     Dr	$    15,000.00
Accumulated depreciation     Dr	$    27,000.00
Loss of sale of equipment      Dr	$      7,000.00
To Equipment		$        49,000.00
(Being equipment sold at a loss of $ 7,000)