Question

On July 15, 2018, Cottonwood Industries sold a patent and equipment to Roquemore Corporation for $840,000 and $370,000, respectively. The book value of the patent and equipment on the date of sale were $165,000 and $454,000 (cost of $649,000 less accumulated depreciation of $195,000), respectively. Prepare the journal entries to record the sales of the patent and equipment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Solution:
1.	Date	General Journal	Debit	Credit
	July 15, 2018	Cash	840,000
		Patent		165,000
		Gain on sale of Patent		675,000
Working Notes:
		Cash	840,000
		[amount received]
		Patent		165,000
		[book value]
		Gain on sale of Patent		675,000
		[Amount received - Book value]
		[840,000-165,000=675,000]
2.	Date	General Journal	Debit	Credit
	July 15, 2018	Cash	370,000
		Loss on disposal of Equipment	84,000
		Accumulated Depreciation	195,000
		Equipment		649,000
Working Notes:
		Cash	370,000
		[amount received]
		Loss on disposal of Equipment	84,000
		[cost -accumulated depreciation -cash received]
		[649,000 - 195,000 -370,000=84,000]
		Accumulated Depreciation	195,000
		[Deprecation till date]
		Equipment		649,000
		[cost]
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