Question

Granite Stone Creamery sold ice cream equipment for $16,000. Granite Stone originally purchased the equipment for $90,000, and depreciation through the date of sale totaled $71,000. Record the gain or loss on the sale of the equipment. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

To calculate the gain or loss on the sale of the equipment, we need to compare the selling price with the carrying value of the equipment.

The carrying value of the equipment is the original cost minus accumulated depreciation. In this case, the original cost of the equipment is $90,000, and the depreciation through the date of sale is $71,000.

Carrying value = Original cost - Accumulated depreciation

Carrying value = $90,000 - $71,000

Carrying value = $19,000

Now, let's compare the carrying value with the selling price of $16,000.

Since the selling price is lower than the carrying value, we have a loss on the sale of the equipment.

To record the loss on the sale of the equipment, we would make the following journal entry:

Loss on Sale of Equipment $3,000

Equipment $19,000

Accumulated Depreciation $71,000

This entry reflects the decrease in the carrying value of the equipment and recognizes the loss on the sale.

Please note that the specific accounts used may vary depending on the company's chart of accounts. Also, it's important to consult with an accounting professional or refer to the specific accounting standards applicable to your jurisdiction for accurate and specific guidance.

If you have any further questions or need additional clarification, feel free to ask!

Answer 2

Loss = $3,000

Explanation:

To calculate the gain or loss on the sale of the equipment, we need to compare the selling price with the equipment's book value, which is the original cost minus the accumulated depreciation. The formula for gain or loss is as follows:

Gain or Loss = Selling Price - Book Value

Given the information provided:

• Selling Price = $16,000
• Original Cost = $90,000
• Depreciation = $71,000

Calculate the book value:

• Book Value = Original Cost - Depreciation
• Book Value = $90,000 - $71,000
• Book Value = $19,000

Now, calculate the gain or loss:

• Gain or Loss = Selling Price - Book Value
• Gain or Loss = $16,000 - $19,000
• Gain or Loss = -$3,000

Since the result is negative, it means there is a loss on the sale of the equipment.

To record this loss in a journal entry:

• Debit Loss on Sale of Equipment: $3,000
• Credit Equipment (the equipment's original cost): $90,000
• Credit Accumulated Depreciation (to remove the accumulated depreciation): $71,000
• Credit Cash (or whichever account received the sale proceeds): $16,000

So, the journal entry to record the loss on the sale of the equipment is:

• Debit Loss on Sale of Equipment: $3,000
• Credit Equipment: $90,000
• Credit Accumulated Depreciation: $71,000
• Credit Cash: $16,000