Question

In: Accounting

Abbott Landscaping purchased a tractor at a cost of $44,000 and sold it three years later...

Abbott Landscaping purchased a tractor at a cost of $44,000 and sold it three years later for $19,600. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $1,500 residual value. Tractors are included in the Equipment account.

1. Record the sale.

2. Assume the tractor was sold for $15,400 instead of $19,600. Record the sale.

Solutions

Expert Solution

  • Working

A

Cost

$            44,000.00

B

Residual Value

$              1,500.00

C=A - B

Depreciable base

$            42,500.00

D

Life [in years]

5

E=C/D

Annual SLM depreciation

$              8,500.00

  • Requirement 1

Accounts title

Debit

Credit

Cash

$19,600

Accumulated Depreciation - Equipment ($ 8500 x 3 years)

$25,500

   Gain on sale

$1,100

   Equipment

$44,000

  • Requirement 2

Accounts title

Debit

Credit

Cash

$15,400

Accumulated Depreciation - Equipment ($ 8500 x 3 years)

$25,500

Loss on sale

$3,100

   Equipment

$44,000


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