Question

Brief Exercise 9-10 a-b Crane Limited sells equipment on September 30, 2018, for $38,960 cash. The equipment originally cost $138,320 when purchased on January 1, 2016. It has an estimated residual value of $4,040 and a useful life of five years. Depreciation was last recorded on December 31, 2017, the company's year end. Record debit side accounts first followed by credit side accounts. Prepare the journal entry to update depreciation using the straight-line method to September 30, 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit Prepare the journal entry to record the sale of the equipment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit

Answer 1

Ans.
No.	Account Title and Explanation	Debit	Credit
1	Depreciation expenses	$20,142
	Accumulated depreciation - Equipment		$20,142
	(Accumulated depreciation for 9 months)
2	Cash	$38,960
	Accmulated depreciation on equipment	$73,854
	Loss on sale of equipment	$25,506
	Equipment		$138,320
	(Equipment sold on loss)
	*Calculations:
	*Straight line depreciation = (Cost of equipment - residual value) / Useful life
	($138,320 - $4,040) / 5
	$134,280 / 5
	$26,856
	Depreciation for 2016 (1 Jan. - 31 Dec.) = $26,856
	Depreciation for 2017 (1 Jan. - 31 Dec.) = $26,856
	Depreciation for 2018 (1 Jan. - 30 Sep.) = $26,856 * 9 / 12   = $20,142
	Accumulated depreciation   =   $26,856 + $26,856 + $20,142 =   $73,854
	*Calculations for Book value:
	Total cost	$138,320
	Less: Accumulated depreciation	$73,854
	Book value	$64,466
	Loss on sale of equipment =   Book value at the time of sale - Sales value
	$64,466 - $38,960
	$25,506
	Sales value > Book value = Gain on sale of equipment
	Sales value < Book value = Loss on sale of equipment
	Sales value = Book value = No profit no loss