Exercise 9-10 Pryce Company owns equipment that cost $60,900 when purchased on J

Question

Exercise 9-10

Pryce Company owns equipment that cost $60,900 when purchased on January 1, 2014. It has been depreciated using the straight-line method based on an estimated salvage value of $4,300 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. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g.125. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.

Account Titles and Explanation

Debit

Credit

(To record depreciation)

(To record sale of equipment)

(To record depreciation)

(To record sale of equipment)

(a) Sold for $28,960 on January 1, 2017. (b) Sold for $28,960 on May 1, 2017. (c) Sold for $11,000 on January 1, 2017. (d) Sold for $11,000 on October 1, 2017.

Explanation / Answer

Annual deprecation = (Cost - Salvage) / Life = ($60,900 - $4,300)/5 = $11,320

No. Account Titles and Explanation Debit Credit (a) Cash $28,960 Accumulated depreciation ($11,320 x 3) $33,960 Equipment $60,900 Gain on sale of equipment $2,020 (b) Depreciation expense $3,773   Accumulated depreciation ($11,320 x 4/12) $3,773 (To record depreciation) Cash $28,960 Accumulated depreciation ($11,320 x 3 + $3,773) $37,733   Equipment $60,900   Gain on sale of equipment $5,793 (To record sale of equipment) (c) Cash $11,000 Accumulated depreciation ($11,320 x 3) $33,960 Loss on sale of equipment $15,940   Equipment $60,900 (d) Depreciation expense $8,490 Accumulated depreciation ($11,320 x 9/12) $8,490 (To record depreciation) Cash $11,000 Accumulated depreciation ($11,320 x 3 + $8,490) $42,450 Loss on sale of equipment $7,450   Equipment $60,900 (To record sale of equipment)

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