Karley's journal entry to record the sale
Date: July 1, 2030
1. Debit: Accumulated Depreciation ($120,000)
Credit: Equipment ($120,000)
- To remove the accumulated depreciation on the equipment.
2. Debit: Cash ($75,000)
Credit: Accumulated Depreciation ($90,000)
Credit: Gain on Sale of Equipment ($45,000)
Credit: Equipment ($210,000)
- To record the sale of the equipment for $75,000, recognizing the gain on the sale.
The Breakdown
- The first entry removes the accumulated depreciation of $120,000 from the books, as it is no longer applicable after the sale.
- The second entry records the cash received from the sale of $75,000. It also removes the remaining accumulated depreciation of $90,000 (depreciation for the first 6 months of 2030) and recognizes a gain on the sale of $45,000. The gain is calculated as the selling price ($75,000) minus the book value of the equipment ($210,000 - $120,000 - $12,000 = $78,000).