Question

As part of a major renovation at the beginning of the year, Atiase Pharmaceuticals, Inc. sold shelving units (recorded as Equipment) that were 10 years old for $950 cash. The shelves originally cost $7,000 and had been depreciated on a straight-line basis over an estimated useful life of 10 years with an estimated residual value of $500. 

.1. Complete the table below, indicating the account, amount, and direction of the effect on disposal. Assume that depreciation has been recorded to the date of sale. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign. Do not round intermediate calculations.) 

2. Prepare the journal entry to record the sale of the shelving units. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.) 

Answer 1

Information Given -

Atiase Pharmaceuticals, Inc. sold shelving units (recorded as Equipment) that were 10 years old for $950 cash.

The shelves originally cost $7,000 and had been depreciated on a straight-line basis over an estimated useful life of 10 years with an estimated residual value of $500.

.

Answer - (1) -

Statement showing effect of the disposal on the Accounting equation -

Assets	Amount ($)	=	Liabilities	Amount ($)	+	Stockholders' Equity	Amount ($)
Cash	950					Gain on disposal	450*
Equipment	-7000
Accumulated depreciation	6500**

*Gain on disposal = $950 - $500 = $450

**Accumulated depreciation = $7000 - $500 = $6500

.

Answer - (2) -

Journal entry to record the sale of the shelving units

General Journal	Debit ($)	Credit ($)
Cash Accumulated depreciation on Equipment [ $7000 -$500 ] Equipment Gain on disposal of Equipment [ $950 - $500 ]	950 6500 - -	- - 7000 450
Total	7450	7450