Pryce Company owns equipment that cost $72,750 when purchased on January 1, 2012

Question

Pryce Company owns equipment that cost $72,750 when purchased on January 1, 2012. It has been depreciated using the straight-line method based on estimated salvage value of $9,000 and an estimated useful life of 5 years.

Prepare Pryce Company’s journal entries to record the sale of the equipment in these four independent situations. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g.125.)

(a) Sold for $39,250 on January 1, 2015. (b) Sold for $39,250 on May 1, 2015. (c) Sold for $10,470 on January 1, 2015. (d) Sold for $10,470 on October 1, 2015.

Explanation / Answer

Answer: Journal Entry:

Calculation of Depreciation =(72750-9000)/60 months=1062.5 per month

(a) Sold for $39,250 on January 1, 2015

1062.5 x 36 months = 38250 accum. depr.
Dr Cash 39,250
Dr Accumulated Depreciation 38,250
Cr Equipment 72750
Cr Gain on Disposal 4750

(b) Sold for $39,250 on May 1, 2015.

1062.5 x 40 months = 42,500 accum. depr.
Dr Cash 39250
Dr Accumulated Depreciation 42,500
Cr Equipment 72750
Cr Gain on Disposal 9,000

(c) Sold for $10,470 on January 1, 2015.

1062.5 x 36 months = 38250 accum. depr.
Dr Cash 10470
Dr Accumulated Depreciation 38,250

Dr Loss on Disposal 24030

Cr Equipment 72750

(d) Sold for $10,470 on October 1, 2015

1062.5 x 45 months = 47812.5 accum. depr.
Dr Cash 10,470
Dr Accumulated Depreciation 47812.5
Dr Loss on Disposal 14467.5
Cr Equipment 72,750

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