Question

In: Accounting

Strawberry Fields purchased a tractor at a cost of $39,000 and sold it two years later...

Strawberry Fields purchased a tractor at a cost of $39,000 and sold it two years later for $24,900. Strawberry Fields recorded depreciation using the straight-line method, a five-year service life, and an $7,000 residual value.

1. What was the gain or loss on the sale?

2. Record the sale. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Expert Solution

1.

Cost of equipment = $39,000

Useful life = 5 year

Residual value = $7,000

Accumulated depreciation expense = (Cost of equipment - Residual value )/Useful life

= (39,000 - 7,000)/5

= 32,000/5

= $6,400

Accumulated depreciation for 2 year = Accumulated depreciation expense x 2

= 6,400 x 2

= $12,800

Book value of equipment at the end of year 2 = Cost of equipment - Accumulated depreciation for 2 year

= 39,000 - 12,800

= $26,200

Sale price of equipment = $24,900

Loss on sale of equipment = Book value of equipment at the end of year 2 - Sale price of equipment

= 26,200 - 24,900

= $1,300

2.

Journal

Date	Account Title and Explanation	Debit	Credit
	cash	24,900
	Accumulated depreciation - equipment	12,800
	Loss on sale of equipment	1,300
	Equipment		39,000
	(To record sale of equipment)

ekkarill92 answered 1 year ago

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