Abbott Landscaping purchased a tractor at a cost of $40,000 and sold it three years later for $20,300. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $2,500 residual value. Tractors are included in the Equipment account. Assume the tractor was sold for $12,700 instead of $20,300. Record the sale. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

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Business

Corey

28 October, 08:37

Abbott Landscaping purchased a tractor at a cost of $40,000 and sold it three years later for $20,300. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $2,500 residual value. Tractors are included in the Equipment account. Assume the tractor was sold for $12,700 instead of $20,300. Record the sale. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

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Sara Soto · Answer 1

The Journal entries are as follows:

(i) Sale of Equipment

Cash A/c Dr. $20,300

Accumulated Depreciation A/c Dr. $22,500

To Equipment $40,000

To Gain $2,800

(To record the sale of equipment)

(ii) Sale of Equipment

Cash A/c Dr. $12,700

Accumulated Depreciation A/c Dr. $22,500

Loss A/c Dr. $4,800

To Equipment $40,000

(To record the sale of equipment)

Workings:

Accumulated Depreciation = [ (40,000 - 2,500) : 5] * 3 years

= 7,500 * 3 years

= $22,500