Question

River Rock Creamery sold ice cream equipment for $15,600. River Rock originally purchased the equipment for $89,000, and depreciation through the date of sale totaled $70,500.

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 determine the gain or loss on the sale of equipment, subtract the book value from the sale price. River Rock Creamery would record a loss of $2,900 on the sale of the ice cream equipment after accounting for depreciation.

Step-by-step explanation:

To calculate the gain or loss on the sale of equipment by River Rock Creamery, we need to subtract the equipment's book value at the time of sale from the sale price. The book value is calculated by taking the original purchase price and subtracting the accumulated depreciation.

Original purchase price: $89,000

Accumulated depreciation: $70,500

Book value at time of sale: $89,000 - $70,500 = $18,500

Sale price: $15,600

Gain or loss on sale: Sale price - Book value = $15,600 - $18,500 = Loss of $2,900.

As for the journal entry:

• Debit Accumulated Depreciation - Equipment for $70,500
• Debit Loss on Sale of Equipment for $2,900
• Credit Equipment for $89,000
• Credit Cash for $15,600

Answer 2

River Rock Creamery had a loss of $2,900 when they sold their ice cream equipment, which was calculated by comparing the book value of the equipment ($18,500) to the sale price ($15,600). The journal entry would debit cash and accumulated depreciation, while crediting equipment and the loss on sale of equipment.

Step-by-step explanation:

Recording the Sale of Ice Cream Equipment

To calculate the gain or loss on the sale of the equipment, we need to determine the equipment's book value at the time of sale. The book value is the original cost of the equipment minus the accumulated depreciation. River Rock Creamery originally purchased the equipment for $89,000 and up through the date of sale, it had accumulated depreciation of $70,500. Therefore, the book value of the equipment was $89,000 - $70,500 = $18,500.

Since River Rock sold the equipment for $15,600, we compare this sale price to the equipment's book value to determine the gain or loss. The sale resulted in a loss because the sale price was lower than the book value. The loss is calculated as follows:

• Book Value of Equipment: $18,500
• Sale Price of Equipment: $15,600
• Loss on Sale of Equipment: $18,500 - $15,600 = $2,900

The journal entry to record the loss would be:

• 
  
• Debit Cash $15,600
• 
  
• Debit Accumulated Depreciation $70,500
• 
  
• Credit Equipment $89,000
• 
  
• Credit Loss on Sale of Equipment $2,900