Question

Blossom Company owns equipment that cost $84,000 when purchased on January 1, 2019. It has been depreciated using the straight-line method based on an estimated salvage value of $24,000 and an estimated useful life of 5 years.

Prepare Blossom 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 $49,000 on January 1, 2022.

(b) Sold for $49,000 on May 1, 2022.

(c) Sold for $23,000 on January 1, 2022.

(d) Sold for $23,000 on October 1, 2022.

Could you please show working? Thank you!

Answer 1

SOLUTION

Annual depreciation on equipment = (Cost - Salvage value) / useful life

= ($84,000 - $24,000) / 5 = 12,000

Date	Accounts titles and Explanation	Debit ($)	Credit ($)
January 1, 2022	Cash	49,000
	Accumulated depreciation - Equipment (12,000*3 years)	36,000
	Equipment		84,000
	Gain on sale of equipment		1,000
	(To record sale of equipment)
May 1, 2022	Cash	49,000
	Accumulated depreciation - Equipment	40,000
	Equipment		84,000
	Gain on sale of equipment		5,000
	(To record sale of equipment)
January 1, 2022	Cash	23,000
	Accumulated depreciation - Equipment	36,000
	Loss on sale of equipment	25,000
	Equipment		84,000
	(To record sale of equipment)
October 1, 2022	Cash	23,000
	Accumulated depreciation - Equipment	45,000
	Loss on sale of equipment	16,000
	Equipment		84,000
	(To record sale of equipment)