Question

Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to...

Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the equipment is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include a:
Select one:
a. Debit to accumulated depreciation for $22,500.
b. Credit to loss on sale for $10,000.
c. Credit to cash for $20,000.
d. Debit to loss on sale for $10,000.
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Homework Answers

Answer #1

Depreciation for the first year= = $5000

Accumulated Depreciation for 4th Year= 5000 X 4= $20000

Depreciation for 5th year till sale= 5000 X = 2500

Accumulated Depreciation at the time of sale = 20000+2500= $22500

Journal Entry- Sale of Equipment

Cash a/c 20000
Accumulated Depreciation a/c 22500
Loss on sale a/c 2500
Equipment a/c 45000

Answer is option "a" . Debit to accumulated depreciation for $22500

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