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.

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

ekkarill92 answered 1 year ago

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