Question

On January 2, 2017, Barnes Enterprises purchased equipment for $42,000 cash, expecting
the equipment to remain in service for five years, with a $4,000 residual value. Barnes
uses straight-line depreciation. On April 30, 2019, Barnes sold the equipment for $20,000
cash.

Requirement:
Prepare the journal entries to record the purchase of the equipment; depreciation for 2017,
2018, and 2019; and the sale of the equipment. Omit explanations and round to the
nearest dollar.

Answer 1

Answer:

Date	Accounts Titles	Debit	Credit
January 2, 2017	Equipment	42,000
	Cash		42,000
December 31, 2017	Depreciation Expense	7,600
	Accumulated Depreciation		7,600
December 31, 2018	Depreciation Expense	7,600
	Accumulated Depreciation		7,600
April 30, 2019	Depreciation Expense	2,533
	Accumulated Depreciation		2,533
April 30, 2019	Cash	20,000
	Loss on Sale of Equipment	4,267
	Accumulated Depreciation	17,733
	Equipment		42,000

Working Note:

Depreciation Expense for 2017 & 2018 : ($42,000 - $4,000) / 5 years = $7,600

Depreciation Expense for 2019 : $7,600 * 4/12 = $2,533

Loss on Sale of Equipment = (Equipment - Accumulated Depreciation ) - Sales value

= ($42,000 - $17,733) - $20,000 = $4,267