Circle cellar sells equipment on june 1, 2021 for $695,000 cash. Circle incurred 4000 of removal...

Circle cellar sells equipment on june 1, 2021 for $695,000 cash. Circle incurred 4000 of removal and selling costs on disposal. The equipment cost $1,250000 when it was purchased on january 2, 2018. Its estimated residual value and useful life were 200,000 and 10 years, respectfully. Circle uses straight line depreciation and records annual depreciation on december 31. prepare the journal entries to record the asset disposal on june 1 2021

Expert Solution

Answer:
	Annual Depreciation = (Cost (-) Residual value) / Useful life = ( $ 1,250,000 (-) $ 200,000 ) / 10 Years = $ 1,050,000 / 10 Years	$ 105,000
	Acumulated depreciation for 3 years = $ 105,000 x 3 Years	$ 315,000

a
Date	Account and explanation	Debit (in $ )	Credit (in $ )
June 1,2021	Depreciation expense ( $ 105,000 x 5/12)	$ 43,750
	Accumulated Depreciation		$ 43,750
	(To record the Depreciation Expense )

June 1,2021	Accumulated Depreciation ( $ 315,000 + $ 43,750)	$ 358,750
	Cash ( $ 695,000 (-) $ 4,000)	$ 691,000
	Loss on Disposal	$ 200,250
	Equipment		$ 1,250,000
	(To record the disposal of Equipment )

ekkarill92 answered 2 years ago

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