Question
In: Accounting
Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to...
Marks Consulting purchased equipment costing $45,000
on January 1, Year 1. The equipment is estimated to have a salvage
value of $5,000 and an estimated useful life of 8 years.
Straight-line depreciation is used. If the equipment is sold on
July 1, Year 5 for $20,000, the journal entry to record the sale
will include a:
Select one:
a. Credit to loss on sale for $10,000.
b. Credit to cash for $20,000.
c. Debit to accumulated depreciation for $22,500.
d. Debit to loss on sale for $10,000.
Solutions
Expert Solution
Depreciation expense = $45,000 - 5,000 / 8 = $5,000 per year
Accumulated depreciation for 4.5 years = $5,000*4.5 = $22,500
Book value of equipment as on July 1, Year 5 = $45,000 - 22,500 = $22,500
Loss on sale of equipment = $22,500 - 20,000 = $2,500
| General Journal | Debit | Credit |
| Cash | $20,000 | |
| Accumulated depreciation | 22,500 | |
| Loss on sale | 2,500 | |
| Equipment | $45,000 |
Hence option c is correct.
ekkarill92 answered 2 years agoRelated Solutions
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