Question

On january 1, 2015, Equipment costing $100,000 was purchased. Depreciation of $42,000 was taken for 2015. On december 31st the equipment was sold for $50,000. prepare the journal entries to record the purchase, depreciation and sale transactions.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Jan 1, 2015	Equipment A/c	$ 100000
	Cash A/c		$ 100000
Being Purchase of Equipment
As per real account principle, Debit what comes in and credit what goes out and accordingly, we debit Equipment A/c and credit Cash A/c
Dec 31, 2015	Depreciation A/c	$ 42000
	Accumulated Depreciation - Equipment		$ 42000
Being provision for Depreciation
As per Nominal Account Principle, we have to debit all Expenses and losses and credit all incomes and gains accordingly we have debited Depreciation. Accumulated Depreciation is an account which reduces the value of the asset and hence credited.
Dec 31, 2015	Cash A/c	$ 50000
	Accumulated Depreciation - Equipment	$ 42000
	Loss on Disposal of Equipment ($ 100000 - $ 50000 - $ 42000)	$ 8000
	Equiment A/c		$ 100000
Being sale of Equipment and recognition of loss thereon
As per real account principle, Debit what comes in and credit what goes out and accordingly, we Credit Equipment A/c and debit Cash A/c. As per Nominal Account Principle, we have to debit all Expenses and losses and credit all incomes and gains accordingly we have debited loss on sale of Equipment.