Question

On June 30, 2015, Adilide Inc. discarded equipment costing $40,000. Accumulated Depreciation as of December 31, 2014, was $25,000. Assume annual depreciation on the equipment is $2,500.

Journalize the partial year depreciation expense and disposal of the equipment.

Answer 1

1. Journalize the partial year depreciation expense:

Debit Depreciation expense $1,250

Credit Accumulated depreciation account $1,250

2. The entry recording disposal of the equipment:

Debit Accumulated depreciation account $26,250

Debit Loss on asset disposal $13,750

Credit Equipment asset $40,000

Step-by-step explanation:

Annual depreciation on the equipment is $2,500

Depreciation expense for 2015 = $2,500/2 = $1,250

The entry:

Debit Depreciation expense $1,250

Credit Accumulated depreciation account $1,250

On June 30, 2015, Accumulated Depreciation = $25,000 + $1,250 = $26,250

The Book value of the asset = $40,000 - $26,250 = $13,750

The entry recording disposal of the equipment:

Debit Accumulated depreciation account $26,250

Debit Loss on asset disposal $13,750

Credit Equipment asset $40,000