Final answer:
The student's question involves accounting for the disposal of equipment. The transaction involves calculating the book value, comparing it to the cash received, and recording the appropriate gain or loss along with the removal of the equipment and accumulated depreciation from the books.
Step-by-step explanation:
The student's question pertains to the recording of a disposal of equipment in accounting. Equipment that initially cost $147,000 and had $128,000 of accumulated depreciation recorded was disposed of for $27,000 cash.
To determine the gain or loss from this disposal, we subtract the accumulated depreciation from the original cost of the equipment to find the book value, and then compare this amount to the disposal price.
- Calculate book value: Original cost ($147,000) - Accumulated depreciation ($128,000) = Book value ($19,000).
- Compare book value to disposal price: Disposal price ($27,000) - Book value ($19,000) = Gain on disposal ($8,000).
The entry to record the disposal would therefore include a debit to Cash for $27,000, a credit to Accumulated Depreciation for $128,000 to remove it from the books, a debit to Loss on Disposal of Equipment (if applicable, but here we have a gain), and a credit to Equipment for the original cost of $147,000.
Since we have a gain, we would also include a credit to Gain on Disposal of Equipment for $8,000.