Question

Assume that Gonzalez Company purchased an equipment on January 1, 2014, for $78,000. The equipment had an estimated life of six years and an estimated residual value of $6,000. The company used the straight-line method to depreciate the equipment.

Assume that Gonzalez Company sold the equipment on July 1, 2016, and received $21,000 cash and a note for an additional $21,000.

Required:

1.	Make the journal entry to record depreciation on the equipment through July 1, 2016. Record the sale of the asset on July 1, 2016.

General journal Balance Sheet Income statement

CHART OF ACCOUNTS Gonzalez Company General Ledger REVENUE 411 Sales Revenue ASSETS 111 Cash 121 Accounts Receivable 123 Notes Receivable EXPENSES 141 Inventory 152 Prepaid Insurance 500 Cost of Goods Sold 521 Salaries and Wages Expense 532 Utilities Expense 533 Insurance Expense 154 Supplies 174 Equipment 177 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries and Wages Payable 235 Notes Payable 261 Income Taxes Payable 534 Rent Expense 537 Supplies Expense 541 Depreciation Expense 551 Advertising Expense 559 Miscellaneous Expenses 810 Interest Expense 812 Loss on Sale of Asset 910 Income Tax Expense EQUITY 311 Capital Stock 331 Retained Earnings

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY	REVENUE	EXPENSES	NET INCOME
1
2
3
4
5
6
7

Answer 1

DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY	REVENUE	EXPENSES	NET INCOME
1	Depreciation Expense	541	$6,000
2	Accumulated Depreciation	177		$6,000	-$6,000				-$6,000	-$6,000
3	Cash	111	$21,000		$21,000
4	Notes Receivable	123	$21,000		$21,000
5	Accumulated Depreciation	177	$30,000		$30,000
6	Loss on Sale of Asset	812	$6,000						-$6,000	-$6,000
7	Equipment	174		$78,000	-$78,000
Working
Depreciation per year = ($78,000 - $6,000)/6 years = $12,000