Sandhill Company owns equipment that cost $75,000 when purchased
on January 1, 2019. It has been depreciated using the straight-line
method based on an estimated salvage value of $15,000 and an
estimated useful life of 5 years.
Prepare Sandhill 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 0 for the
amounts.)
(a) | Sold for $41,000 on January 1, 2022. | |
(b) | Sold for $41,000 on May 1, 2022. | |
(c) | Sold for $24,000 on January 1, 2022. | |
(d) | Sold for $24,000 on October 1, 2022. |
Solution:
Annual depreciation on equipment = (Cost - Salvage value) / useful life = ($75,000 - $15,000) / 5 = $12,000
Journal Entries | ||||
Event | Date | Particulars | Debit | Credit |
a | 1-Jan-22 | Cash Dr | $41,000.00 | |
Accumulated depreciation - Equipment Dr | $36,000.00 | |||
To equipment | $75,000.00 | |||
To Gain on sale of equipment | $2,000.00 | |||
(To record sale of equipment) | ||||
b | 1-May-22 | Cash Dr | $41,000.00 | |
Accumulated depreciation - Equipment Dr | $40,000.00 | |||
To equipment | $75,000.00 | |||
To Gain on sale of equipment | $6,000.00 | |||
(To record sale of equipment) | ||||
c | 1-Jan-22 | Cash Dr | $24,000.00 | |
Accumulated depreciation - Equipment Dr | $36,000.00 | |||
Loss on sale of equipment Dr | $15,000.00 | |||
To equipment | $75,000.00 | |||
(To record sale of equipment) | ||||
d | 1-Oct-22 | Cash Dr | $24,000.00 | |
Accumulated depreciation - Equipment Dr | $45,000.00 | |||
Loss on sale of equipment Dr | $6,000.00 | |||
To equipment | $75,000.00 | |||
(To record sale of equipment) |
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Exercise 9-11
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