Question

Gunkelson Company sells equipment on September 30, 2015, for $18,010 cash. The equipment originally cost $71,880 and as of January 1, 2015, had accumulated depreciation of $42,260. Depreciation for the first 9 months of 2015 is $5,480. Prepare the journal entries to (a) update depreciation to September 30, 2015, and (b) record the sale of the equipment.

Answer 1

Answer:

a. The journal entries to update depreciation to September 30, 2015:

Debit Depreciation Expense $5,480

Credit Accumulated depreciation account $5,480

b.

Debit Cash $18,010

Debit Accumulated depreciation account $47,740

Debit Loss on asset disposal $6,130

Credit Equipment asset $71,880

Explanation:

a. The journal entries to update depreciation to September 30, 2015:

Debit Depreciation Expense $5,480

Credit Accumulated depreciation account $5,480

b.

Accumulated depreciation account at September 30, 2015 = $42,260 + $5,480 = $47,740

The carrying amount of the equipment = The equipment originally cost - Accumulated depreciation = $71,880 - $47,740 = $24,140

Sale price - Carrying amount of the asset = $18,010 - $24,140 = -$6,130 <0

=> The company recognizes loss on disposal $6,130

The entry:

Debit Cash $18,010

Debit Accumulated depreciation account $47,740

Debit Loss on asset disposal $6,130

Credit Equipment asset $71,880