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Garcia Co. owns equipment that cost $81,200, with accumulated depreciation of $43,000. Garcia sells the equipment for cash. Record the sale of the equipment under the following three separate cases assuming Garcia sells the equipment for (1) $50,300 cash, (2) $38,200 cash, and (3) $33,100 cash.

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Answer and Explanation:

The journal entries are as follows

1. For sale of equipment at $50,300

Cash Dr $50,300

Accumulated depreciation $43,000

To Equipment $81,200

To Gain on sale of equipment $12,100

(Being the sale of equipment is recorded)

Since the equipment is sold for $50,300 which increased the assets so cash account is debited along with it the accumulated depreciation is debited and the cost of equipment is credited plus the balancing figure is transferred to gain on sale of equipment because the sale value is more than the book value

2. For sale of equipment at $38,200

Cash Dr $38,200

Accumulated depreciation $43,000

To Equipment $81,200

(Being the sale of equipment is recorded)

Since the equipment is sold for $38,200 which increased the assets so cash account is debited along with it the accumulated depreciation is debited and the cost of equipment is credited

The book value and the sale value is equal so there is no loss or no gain recognized in this case

3. For sale of equipment at $33,100

Cash Dr $33,100

Accumulated depreciation $43,000

Loss on sale of equipment $5,100

To Equipment $81,200

(Being the sale of equipment is recorded)

Since the equipment is sold for $$33,100 which increased the assets so cash account is debited along with it the accumulated depreciation is debited and the cost of equipment is credited plus the balancing figure is transferred to loss on sale of equipment because the sale value is less than the book value

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