Computer equipment (office equipment) purchased 6 1/2 years ago for $170,000, wi

Question

Computer equipment (office equipment) purchased 6 1/2 years ago for $170,000, with an estimated life of 8 years and a residual value of $10,000, is now sold for $60,000 cash. (Appropriate entries for depreciation had been made for the first six years of use.) Journalize the following entries: Record the depreciation for the one-half year prior to the sale, using the straight-line method. (a) (b) Record the sale of the equipment (c) Assuming that the equipment had been sold for $30,000 cash, prepare the entry for (b) above to record the sale

Explanation / Answer

Journal entry :

No Accounts & explanation debit credit a Depreciation expense (170000-10000/8)*6/12 10000 Accumlated depreciation 10000 (To record depreciation) b Cash 60000 Accumlated depreciation (20000*6+10000) 130000 Gain on sale of equipment 20000 Equipment 170000 (To record sale of equipment) c Cash 30000 Accumlated depreciation 130000 Loss on sale of equipment 10000 Equipment 170000 (To record sale of equipment)

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