Question

Carla Vista Company owns equipment that cost $81,000 when purchased on January 1, 2019. It has been depreciated using the strCarla Vista Company owns equipment that cost $81,000 when purchased on January 1, 2019. It has been depreciated using the straight-line method based on an estimated salvage value of $21,000 and an estimated useful life of 5 years.

Prepare Carla Vista 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 $46,000 on January 1, 2022.
(b) Sold for $46,000 on May 1, 2022.
(c) Sold for $22,000 on January 1, 2022.
(d) Sold for $22,000 on October 1, 2022
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Answer #1
No. Account title and explanation Debit Credit
(a) Cash $46,000
Accumulated depreciation-equipment [12,000 x 3 years] $36,000
Equipment $81,000
Gain on sale of equipment $1,000
[To record sale of equipment]
(b) Depreciation expense [12,000 x (4 months/12 months)] $4,000
Accumulated depreciation-equipment $4,000
[To record depreciation expense]
Cash $46,000
Accumulated depreciation-equipment [(12,000 x 3 years) + 4,000] $40,000
Equipment $81,000
Gain on sale of equipment $5,000
[To record sale of equipment]
(c ) Cash $22,000
Accumulated depreciation-equipment [12,000 x 3 years] $36,000
Loss on sale of equipment $23,000
Equipment $81,000
[To record sale of equipment]
(d) Depreciation expense [12,000 x (9 months/12 months)] $9,000
Accumulated depreciation-equipment $9,000
[To record depreciation expense]
Cash $22,000
Accumulated depreciation-equipment [(12,000 x 3 years) + 9,000] $45,000
Loss on sale of equipment $14,000
Equipment $81,000
[To record sale of equipment]

Calculations:

Depreciation expense per year = (Cost - Salvage value) ÷ Useful life

=(81,000-21,000)/5

=$12,000

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