In: Accounting
Mercury Inc. purchased equipment in 2019 at a cost of $138,000.
The equipment was expected to produce 500,000 units over the next
five years and have a residual value of $38,000. The equipment was
sold for $78,200 part way through 2021. Actual production in each
year was: 2019 = 70,000 units; 2020 = 112,000 units; 2021 = 57,000
units. Mercury uses units-of-production depreciation, and all
depreciation has been recorded through the disposal date.
Required:
1. Calculate the gain or loss on the sale.
2. Prepare the journal entry to record the
sale.
3. Assuming that the equipment was instead sold
for $105,200, calculate the gain or loss on the sale.
4. Prepare the journal entry to record the sale in
requirement 3.