Question

A company owns equipment which originally cost $300,000. The estimated salvage value is $50,000 and it was anticipated that the equipment would operate for 100,000 total hours over its useful life. The equipment's Accumulated Depreciation amounted to $108,000 after adjustment on December 31, 2018, based on the units-of-production method of depreciation.

On June 1, 2019, the company sells the equipment for $214,000 cash. Between January 1 and June 1, 2019 the equipment operated for 2,500 hours.

Assume the company makes adjusting entries once per year on December 31st. In the space below, record the journal entry for the equipment disposal on June 1, 2019 (use good form; e.g., debits written first and credits indented below the debits).

Answer 1

Journal Entry for Equipment disposal
Sr. No.	Date	Account Titles & Explanation	Debit ($)	Credit ($)
1	June 1, 2019	Cash A/c                                                          Dr.	2,14,000
		Depreciation                                                  Dr.	6,250
		Accumulated Depreciation A/c                Dr.	1,08,000
		To Equipment		3,00,000
		To profit on sale of equipment		28,250
		(Being Equipment sold)
Workings:-
Depreciation on Equipment = {(Cost - Salvage value)/Total hours of operation} X Hours operated
Depreciation between January 1 to June 1 = {(3,00,000-50,000)/1,00,000}X2,500 = 6,250