Question

Current Attempt in Progress Crane Company owns equipment that cost $85,000 when purchased on January 1, 2019. It has been depreciated using the straight- line method based on an estimated salvage value of $25,000 and an estimated useful life of 5 years. Prepare Crane 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 for the amounts.) (a) (b) Sold for $50,000 on January 1, 2022. Sold for $50,000 on May 1, 2022. Sold for $21,000 on January 1, 2022. Sold for $21,000 on October 1, 2022. (c) (d)

Answer 1

HI there,

Here is my answer to the question asked.

Given,

Value of equipment = $ 85,000

Scrap Value = $ 25,000   

Useful life = 5 Years

Date of Purchase = 01/01/2019

Straight line depreciation = ( Cost − Residual Value ) / Useful Life

= 85000 - 25000 / 5

= $ 12,000 per annum

Journal Entries as follows :

(a) sold for $50,000 on 01/01/2022 :

Account Title and Explanation Debit($) Credit($)

Accumulated Depreciation 36,000

Bank 50,000

Equipment 85,000

Gain on sale of wquipment 1000

(b) sold for $50,000 on 01/05/2022 :

Account Title and Explanation Debit($) Credit($)

Depreciation Expense 4,000

Accumulated Depreciation 36,000

cash   50,000

Equipment 85,000

Gain on sale of wquipment 5,000

(c) sold for $21,000 on 01/01/2022 :

Account Title and Explanation Debit($) Credit($)

Depreciation Expense 0

Accumulated Depreciation 36,000

cash 21,000

Loss on sale of equipment 28,000

Equipment 85,000

(d) sold for $21,000 on 01/10/2022 :

Account Title and Explanation Debit($) Credit($)

Depreciation Expense 9,000

Accumulated Depreciation 36,000

cash 21,000

Loss on sale of equipment 19,000

Equipment 85,000