Question

Pharoah Company owns equipment that cost $61,000 when purchased on January 1, 2019. It has been depreciated using the straight- line method based on an estimated salvage value of $1,000 and an estimated useful life of 5 years. Prepare Pharoah Company's journal entries to record the sale of the equipment in these four independent situations. (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 o for the amounts.) (a) Sold for $27,000 on January 1, 2022 (b) Sold for $27,000 on May 1, 2022. (c) Sold for $8,000 on January 1, 2022. (d) Sold for $8,000 on October 1, 2022. No. Account Titles and Explanation Debit Credit (a) (To record depreciation) (To record sale of equipment) (d) (To record depreciation)

Answer 1

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No.	Accounts Title and Explanation	Debit	Credit
(a)	Cash	$       27,000
	Accumulated Depreciation ($12000 X 3 years)	$       36,000
	Equipment		$       61,000
	Gain on sale of Equipment		$         2,000
(b)	Depreciation expense ($12000 * 4/12)	$         4,000
	Accumulated Depreciation		$         4,000
	Cash	$       27,000
	Accumulated Depreciation [($12000 X 3 years)+$4000]	$       40,000
	Equipment		$       61,000
	Gain on sale of Equipment		$         6,000
(c)	Cash	$         8,000
	Accumulated Depreciation ($12000 X 3 years)	$       36,000
	Loss on sale of Equipment	$       17,000
	Equipment		$       61,000
(d)	Depreciation expense ($12000 * 9/12)	$         9,000
	Accumulated Depreciation		$         9,000
	Cash	$         8,000
	Accumulated Depreciation [($12000 X 3 years)+$9000]	$       45,000
	Loss on sale of Equipment	$         8,000
	Equipment		$       61,000
	Workings:
	Depreciation per year	=	(Cost - Residual value) / useful Value
		=	($61000 - $1000) / 5 years
		=	$       12,000