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Chapter 9: 9SE (page 488)

Alpha Communication purchased equipment on January 1, 2018, for \(27,500. Suppose Alpha Communication sold the equipment for \)20,000 on December 31, 2020. Accumulated Depreciation as of December 31, 2020, was $10,000. Journalize the sale of the equipment, assuming straight-line depreciation was used.

Short Answer

Expert verified

The gain on disposal of equipment is $2,500 and the required journal entries are passed.

Step by step solution

01

Computation of Gain or loss

Gainor(loss)=MarketValueofAssetReceived-(LessBookValue-AccumulatedDepreciation)=$20,000-($27,500-$10,000)=$2,500

02

Journal entry to record depreciation and disposal of the equipment

Journal Entry

Date

Accounts and Explanation

Debit ($)

Credit ($)

Dec 31

Accumulated Depreciation- Equipment

10,000

Cash

20,000

Equipment

27,500

Gain on disposal

2,500

(Sold equipment for cash)

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