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25 October, 07:10

Garcia Co. owns equipment that cost $81,200, with accumulated depreciation of $43,000. Garcia sells the equipment for cash. Record the sale of the equipment under the following three separate cases assuming Garcia sells the equipment for (1) $50,300 cash, (2) $38,200 cash, and (3) $33,100 cash.

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  1. 25 October, 10:09
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    Answer and Explanation:

    The journal entries are as follows

    1. For sale of equipment at $50,300

    Cash Dr $50,300

    Accumulated depreciation $43,000

    To Equipment $81,200

    To Gain on sale of equipment $12,100

    (Being the sale of equipment is recorded)

    Since the equipment is sold for $50,300 which increased the assets so cash account is debited along with it the accumulated depreciation is debited and the cost of equipment is credited plus the balancing figure is transferred to gain on sale of equipment because the sale value is more than the book value

    2. For sale of equipment at $38,200

    Cash Dr $38,200

    Accumulated depreciation $43,000

    To Equipment $81,200

    (Being the sale of equipment is recorded)

    Since the equipment is sold for $38,200 which increased the assets so cash account is debited along with it the accumulated depreciation is debited and the cost of equipment is credited

    The book value and the sale value is equal so there is no loss or no gain recognized in this case

    3. For sale of equipment at $33,100

    Cash Dr $33,100

    Accumulated depreciation $43,000

    Loss on sale of equipment $5,100

    To Equipment $81,200

    (Being the sale of equipment is recorded)

    Since the equipment is sold for $$33,100 which increased the assets so cash account is debited along with it the accumulated depreciation is debited and the cost of equipment is credited plus the balancing figure is transferred to loss on sale of equipment because the sale value is less than the book value
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