Strawberry Fields purchased a tractor at a cost of $39,000 and sold it two years

Question

Strawberry Fields purchased a tractor at a cost of $39,000 and sold it two years later for $26,400. Strawberry Fields recorded depreciation using the straight-line method, a five-year service life, and an S9,000 residual value. 1. What was the gain or loss on the sale? on sale $ 600 2. Record the sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the sale. Note: Enter debits before credits. Transaction General Journal Debit Credit Cash

Explanation / Answer

Cost of tractor = $39,000

Service life of tractor = 5 years

Residual value = $9,000

Depreciation per year = (Cost of tractor - Residual value) ÷ Service life of tractor = (39,000-9,000)÷5 = 30,000÷5 = $6,000

Accumulated depreciation of 2 years = 2 × Depreciation per year = 2×6,000 = $12,000

Sale of tractor = $26,400

Book value of tractor after 2 years = Cost of tractor - Accumulated depreciation of 2 years = 39,000-12,000 = $27,000

Loss on sale of tractor = Book value of tractor after 2 years - Sale of tractor = 27,000-26,400 = $600

Transaction General Journal Debit Credit 1 Cash 26,400 Accumulated depreciation 12,000 Loss on sale of tractor 600 Tractor 39,000 (To record sales of tractor)

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