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20 January, 19:25

Equipment in general governmental service that had been acquired several years ago by a special revenue fund at a cost of $40,000 was sold for $15,000 cash. Accumulated depreciation of $30,000 existed at the time of the sale. The journal entry to be made in the special revenue fund will include all of the following except:

A. A debit to Cash for $15,000. B. A debit to Accumulated Depreciation for $30,000. C. A credit to Equipment for $40,000. D. A credit to Other Financing Sources for $5,000.

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  1. 20 January, 19:43
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    D. A credit to Other Financing Sources for $5,000.

    Explanation:

    As the equipment is used for governmental service and sold, the journal entry to record the disposal is as follows:

    Debit Cash $15,000

    Debit Accumulated Depreciation $30,000

    Credit Equipment $40,000

    Credit Gain on sale of equipment $5,000

    Calculation: Book value of equipment = Cost price - Accumulated depreciation = $40,000 - $30,000 = $10,000

    Therefore, Gain on sale of equipment = Disposal value - Book value = $15,000 - $10,000 = $5,000.

    Therefore, option A is correct. Option B is also correct. Option C is also correct. Therefore, option D is not correct and it is the answer as it will not include in the journal.
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