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Equipment was acquired on January 1, 2021, for $35,000 with an estimated four-year life and $2,000...

Equipment was acquired on January 1, 2021, for $35,000 with an estimated four-year life and $2,000 residual value. The company uses straight-line depreciation. Record the gain or loss if the equipment was sold on December 31, 2023, for $10,700.

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Answer #1
  • Annual Straight line depreciation = ($35000 – 2000) / 4 year
    = $ 8,250
  • Total accumulated depreciation from 1 Jan 2021 to 31 Dec 2023 = 3 years’ = $ 8250 x 3 = $ 24,750
  • Book value at time of sale = $ 35000 – 24750
    = $ 10,250
  • Sold for $ 10,700
  • Sale price is MORE than Book value = GAIN ON SALE
  • Gain on Sale = 10700 – 10250 = $ 450
  • Entry to record sale and gain.

Date

Accounts title

Debit

Credit

31-Dec-23

Cash

$10,700

Accumulated Depreciation - equipment

$24,750

   Gain on sale

$450

   Equipment

$35,000

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