Question

Suppose a piece of plant equipment that PepsiCo put into service on January 1, 2014 at a total cost of $300,000 with an expected useful life of 5 years and a salvage value of $60,000 is sold on June 30, 2018 for $60,000. The accumulated depreciation is $216,000.What would the journal entry look like to record this sale?

Answer 1

Preparation of how the journal entry will look like to record the sale

Dr Cash $60,000

Dr Accumulated Depreciation $216,000

Dr Gain/Loss on Disposal of Assets $24,000

Cr Property, Plant & Equipment $300,000

Step-by-step explanation:

Since we assumed that a piece of plant equipment was put into service on January 1, 2014 at a cost of $300,000 with a salvage value of $60,000 which is been sold out on June 30, 2018 for $60,000 in which the accumulated depreciation was $216,000 this means we have to record the transaction by Debiting Cash with $60,000 ,Debiting Accumulated Depreciation with $216,000 and Debiting Gain/Loss on Disposal of Assets with $24,000 while we Credit Property, Plant & Equipment with $300,000

Calculation of Gain/Loss on Disposal of Assets

Using this formula

Carrying Value = Cost - Accumulated

Depreciation

The Carrying value will be :

300,000 - 216,000 = $84000

The asset loss on disposal of Assets will be:

60,000 - 84,000 = loss of 24000