Question

Sunland Company sold equipment for $22,000. The equipment originally cost $50,000 in 2019 and $12,000 was spent on a major overhaul in 2022 (charged to the Equipment account). Accumulated Depreciation on the equipment to the date of disposal was $40,000. Prepare the appropriate journal entry to record the disposition of the equipment. (Credit account titles are automatically indented when the 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.) Account Titles and Explanation Debit Credit Carla Vista Company sold equipment that had a book value of $27,000 for $30,000. The equipment originally cost $90,000 and it is estimated that it would cost $114,000 to replace the equipment. Prepare the appropriate journal entry to record the disposition of the equipment. (Credit account titles are automatically indented when the 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.) Account Titles and Explanation Debit Credit

Answer 1

1) In accounting, the cost of an item is allocated to the cost of an asset, as opposed to being an expense, if the company expects to Incurr such cost to bring the asset ready for use. Rather than being expensed, the cost of the item or fixed asset is capitalized and amortized or depreciated over its useful life. Given that $ 12,000 charged to Equipment Account. Credit General Journal Cash Accumulated Depreciation Equipment (50,000+12000) (Being Equipment Disposed) Debit 22000 40000 62000 2) Orignal Cost of Equipment= $ 90,000 Book Value of Equipment = $ 27,000 Hence Accumulated Depreciation of Equipment= $ 90,000 - $ 27,000 = $ 63,000 Sale Value of Equipment = $ 30,000 Credit Debit 30000 63000 General Journal Cash Accumulated Depreciation Gain on Sale Equipment (Being Equipment Disposed) 3000 (Balance in Figure) 90000 Note: Cost to Replace Value $ 114,000 is Irrelevent here.