Question

Sale of Plant Asset Shannon Company has a equipment that originally cost $68,000. Depreciation has been recorded for six years using the straight-line method, with a $9,000 estimated salvage value at the end of an expected eight-year life. After recording depreciation at the end of six years, Shannon sells the equipment. Prepare the journal entry to record the equipment's sale for (Round to the nearest dollar): a. $30,000 cash b. $23,750 cash c. $21,000 cash General Journal Credit Debit Date Description Cash a. Equipment To record sale of equipment Cash b. To record sale of equipment Cash Accumulated Depreciation-Equipment To record sale of equipment Check

Answer 1

Entry for sale of equipment

Depreciation = 68000 - 9000 / 8 = 7375

Accumulated Depreciation balance at the end of 6th year = 7375 x 6 = 44250

1) cash received 30000

Cash Account Dr                                30000

Accumulated Depreciation Account Dr 44250

                           To Asset Account                             68000

                           To Gain on Sale of Asset Account      6250 (Balancing Figure)

2) cash received 23750

Cash Account Dr                                23750

Accumulated Depreciation Account Dr 44250

                           To Asset Account                             68000

                          

3) cash received 21000

Cash Account Dr                                21000

Accumulated Depreciation Account Dr 44250

Loss on sale of asset Account Dr          2750 (balancing figure)

                           To Asset Account                             68000

                          

Cash Account will be debited in every case ,accumulated depreciation will be reversed with the depreciation of 6 years , asset account will be credited because asset is sold ,gain /loss will be balancing figure.