Question

Sunland Company sells office equipment on July 31, 2022, for $22,080 cash. The office equipment originally cost $72,560 and as of January 1, 2022, had accumulated depreciation of $38,910. Depreciation for the first 7 months of 2022 is $4,980.

Required:
Prepare the journal entries to (a) update depreciation to July 31, 2022, and (b) record the sale of the equipment.

Answer 1

Answer:

Accumulated depreciation on Jan 1 , 2022 = $38,910

Depreciation for first 7 months of 2022 = $4,980

Accumulated depreciation on July 31 , 2022 = Accumulated depreciation on Jan 1 , 2022 + Depreciation for first 7 months of 2022 = 38,910 + 4,980 = $43,890

Sale price of equipment = $22,080

Book value of equipment on July 31, 2022 = Cost price - Accumulated depreciation = 72,560 - 43,890 = $28,670

Loss on disposal of equipment = Book value of equipment on July 31, 2022 - Sale price of equipment = 28,670 - 22,080 = $6,590

No. Account Titles and Explanation                Debit     Credit

(a)    Depreciation expense                               $4,980

            Accumulated depreciation- equipment             $4,980

(b)    Cash                                                            $22,080  

Accumulated depreciation - equipment           $43,890  

Loss on disposal of equipment                         $6,590

                   Equipment                                                     $72,560