Sunland Company owns equipment that cost $73,000 when purchased on January 1, 2019. It has been depreciated using the straight-line method based on an estimated salvage value of $13,000 and an estimated useful life of 5 years. Prepare Sunland Company's journal entries to record the sale of the equipment in these four independent situations. (a) Sold for $39,000 on January 1, 2022. (b) Sold for $39,000 on May 1, 2022. (c) Sold for $22,000 on January 1, 2022. (d) Sold for $22,000 on October 1, 2022.

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andromache andromache · Answer 1 · 2021-05-27T04:00:01+02:00

Answer and Explanation:

The journal entries are shown below;

(a)

Cash $39,000

Accumulated Depreciation $36,000 [($73,000 - $13,000) × 3 ÷ 5]

To Equipment $73,000

To Gain on Sale of Equipment $2,000

(being the sale of equipment is recorded)

(b)

Depreciation $4,000 [($73,000 - $13,000) ÷ 5 × 4 ÷12]

To Accumulated Depreciation $4,000

(being depreciation expense is recorded)

Cash $39,000

Accumulated Depreciation $40,000 ($36,000 + $4,000)

To Equipment $73,000

To Gain on Sale of Equipment $6,000

(being the sale of equipment is recorded)

(c)

Cash $22,000

Accumulated Depreciation $36,000

Loss on Sale of Equipment $15,000

To Equipment $73,000

(being the sale of equipment is recorded)

(d)

Depreciation $9,000 [($73,000 - $13,000) ÷ 5 × 9 ÷ 12]

To Accumulated Depreciation $9,000

(Being depreciation expense is recorded)

Cash $22,000

Accumulated Depreciation $45,000 ($36,000 + $9,000)

Loss on Sale of Equipment $6,000

To Equipment $73,000

(being sale of equipment is recorded)