Question

Oriole Company sells office equipment on July 31, 2022, for $21,000 cash. The office equipment originally cost $73,600 and as of January 1, 2022, had accumulated depreciation of $42,300. Depreciation for the first 7 months of 2022 is $5,250. Prepare the journal entries to (a) update depreciation to July 31, 2022, and (b) record the sale of the equipment.

Answer 1

(a) update depreciation to July 31, 2022

Debit : Depreciation expense $5,250

Credit : Accumulated depreciation $5,250

(b) record the sale of the equipment.

Debt : Cash $21,000

Debit : Accumulated depreciation $47,550

Debit : Profit and loss $5,050

Credit : Office equipment at Cost $73,600

Step-by-step explanation:

It is important to remember that even in the year of sale, we still have to provide for depreciation of the asset for the period it was in use for that year. Hence the need to prepare a journal to update the depreciation.

After a disposal, the company incurs either a profit or a loss and this must be accounted for. The whole process of a sale can be shown in a journal.

Accumulated depreciation = $42,300 + $5,250 = $47,550

The Loss on sale of the asset is $5,050.