Question

Required information Problem 7-88 Record the disposal of equipment (LO7-6) [The following information applies to the questions displayed below.] New Deli is in the process of closing its operations. It sold its three-year-old ovens to Sicily Pizza for $320,500. The ovens originally cost $427,500, had an estimated service life of 10 years, had an estimated residual value of $27,500, and were depreciated using straight-line depreciation. Complete the requirements below for New Deli Problem 7-8B Part 4 4. Record the sale of the ovens at the end of the third year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the disposal of equipment. Note: Enter debits before credits. Transaction General Journal Debit Credit

Answer 1

Journal entry to record the disposal of oven

Date	General Journal	Debit	Credit
	Cash	$320,500
	Accumulated Depreciation Ovens	$120,000
	Gain on Disposal of Ovens		$    13,000
	Ovens		$ 427,500
	(To record sale of ovens)

Workings

Straight line method
Capitalized Cost	$             427,500
Life of Assets	10	years
Residual value	$               27,500
Depreciation = (Cost-Residual Value)/Life years	(427500-27500)/10
Depreciation per year	$               40,000	Per year
Depreciation for 3 years upto sale = 40000*3	$             120,000
Accumulated depreciation at the time of sale	$             120,000
Book value at the time of sale = $427500-$120000=	$             307,500
Sold for	$             320,500
Gain on sale = 320500-307500 =	$               13,000

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