Question

Monty Manufacturing has old equipment that cost $52,000. The equipment has accumulated depreciation of $28,300. Monty has decided to sell the equipment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

a. What entry would Monty make to record the sale of the equipment for $38,000 cash.
b. What entry would Monty make to record the sale of the equipment for $16,500 cash.

Answer 1

a.

Cash$38,000 (debit)

Accumulated Depreciation$28,300 (debit)

Equipment $52,000 (credit)

Profit on Sale of Equipment $14,300

b.

Cash$16,500 (debit)

Accumulated Depreciation$28,300 (debit)

Loss on Sale of Equipment $7,300

Equipment $52,000 (credit)

Step-by-step explanation:

For any Disposal of an Asset the following should occur:

1. De-recognise cost of the Asset
2. De-recognise Accumulated Depreciation
3. Recognise the Proceeds of the Sale
4. Recognise Profit or Loss on Sale

Answer 2

a.

Cash 38000 Dr

Accumulated Depreciation-Equipment 28300 Dr

Equipment Account 52000 Cr

Gain on Disposal 14300 Cr

b.

Cash 16500 Dr

Accumulated Depreciation-Equipment 28300 Dr

Loss on Disposal 7200 Dr

Equipment Account 52000 Cr

Step-by-step explanation:

a.

The carrying value of the equipment is its net value in the books after deducting the accumulated depreciation from the cost.

The carrying value of the asset before sale is = 52000 - 28300 = $23700

The gain/loss on disposal = Cash received from sale - carrying value

Gain/loss on disposal = 38000 - 23700 = $14300 or a gain of $14300

b.

The gain/loss on disposal = 16500 - 23700 = -$7200 or a loss of $7200