Question

Pryce company owns equitment that cost $67,200 when purchased on January 1, 2014. It has been depreciated using the straight- line method based on estimated salvage value of $5000 and an estimated of $5000 and an estimated useful life of 5 years.

Prepare Pryce companys journal entries to record the sale of equitment in these four independent situations.

A.) sold for $32,320 on Jan 1, 2017

B.) sold for $32,320 on May 1, 2017

C.) sold for $ 10,400 on Jan 1, 2017

D.) sold for $ 10,400 on Oct 1, 2017

Answer 1

A.sold for $32,320 on jan 1 ,2017.

note: accumulated depreciation till january 1 2017 = annual depreciation * 3 years

annual depreciation = (67,200 - 5000) / 5 years

=>$12,440.

accumulated depreciation = $12,440*3 =>$37,320.

the following is the journal entry:

jan 1	cash a/c	32,320
	accumulated depreciation	37,320
	...............To equipment a/c		67,200
	...............To gain on sale of equipment		2,440
	(gain = 32,320+37,320-67,200)

B.sold for $32,320 on may 1 2017..

accumulated depreciation = accumulated depreciation till january 1 2017 + 4 months depreciation in 2017

=>$37,320 + ($12,440*4/12) =>$37,320 + 4,147

=>$41,467.

journal entry:

may 1	cash a/c	32,320
	accumulated depeciation a/c	41,467
	..................To Equipment a/c		67,200
	...................To Gain on sale of equipment		6,587
	(gain = 32,320+41,467 - 67,200)

c.sold for $10,400 on jan 1 2017.

accumulated depreciation = $37,320....(as calculated in A above).

jan 1	cash a/c	10,400
	accumulated depreciation a/c	37,320
	loss on sale of equipment a/c	19,480
	..................To Equipment a/c		67,200
	(loss = 67,200 - 10,400-37,320=>19,480)

d.sold for $10,400 on oct 1 2017

accumulated depreciation = $37,320 + 8 months depreciation

=>$37,320 + ($12,440 * 8/12) =>$37,320 + 8,293.33

=>$45,613.33

oct 1 2017	cash a/c	10,400
	accumulted depreciation a/c	45,613
	loss on sale of equipment a/c	11,817
	.................To Equipment a/c		67,200
	(loss = 67,200 - 10,400-45,613)