Question

Assume that equipment acquired at a cost of $10,000 is fully depreciated. On June 30, the equipment is discarded. The entry to record the discard would be to debit __________ and credit __________.

A) Equipment; Accumulated Depreciation—Equipment
B) Accumulated Depreciation—Equipment; Equipment
C) Equipment; Depreciation Expense—Equipment
D) Accumulated Depreciation—Equipment; Depreciation Expense—Equipment

Answer 1

The correct entry to record the discard of fully depreciated equipment is to debit Accumulated Depreciation—Equipment and credit Equipment, reflecting the removal of the asset and its accumulated depreciation from the company's books.

Step-by-step explanation:

When equipment that cost $10,000 and is fully depreciated is discarded, the correct accounting entry would be to remove both the asset's cost and its accumulated depreciation from the books. The entry to record the discard would be to debit Accumulated Depreciation—Equipment for the amount of depreciation that has been accumulated over the years and to credit Equipment for the original cost of the equipment. This reflects that the asset is no longer owned and has no future economic benefits.

Therefore, the correct answer to the question is: A) Equipment; Accumulated Depreciation—Equipment. Upon disposal, there would be no impact on the income statement, since the equipment is fully depreciated, which means that the expense has already been recognized in prior periods.

The correct entry to record the discard of fully depreciated equipment would be to debit Accumulated Depreciation—Equipment and credit Equipment.