Answer:
D. a credit to Equipment for $10,000
E. a debit to Cash for $6,000
F. a debit to Accumulated Depreciation for $5,000
G. a credit to Gain for $1,000
Explanation:
Calculation:
The cost of equipment = $10,000
Useful Life = 10-year
As the company uses straight-line depreciation method, the formula to calculate the depreciation is as follows:
Straight-line depreciation = [tex]\frac{Total Cost - Salvage Value}{Useful Life}[/tex]
Straight-line depreciation = [tex]\frac{10,000 - 0}{10}[/tex]
Straight-line depreciation = $1,000
At the end of the fifth year, the accumulated depreciation would be,
$1,000 x 5 = $5,000
Therefore, the book value of the equipment = Initial cost - Accumulated depreciation
= $(10,000 - 5,000) = $5,000
Gain from the sale of equipment = Sale of equipment - Book value
Gain = $(6,000 - 5,000) = $1,000
Therefore,
The journal entry should be -
Cash Debit 6,000
Accumulated Depreciation Debit 5,000
Gain from the sale of equipment Credit 1,000
Equipment Credit 10,000
Therefore, Option D - G are correct.
