Answer:
Gain on Sale till end of 5th year = 1,000$
Cash Debit = 6,000$
Equipment Credit = 5000$
PS: Assuming that depreciation entries are being adjusted on annual basis.
Explanation:
Given Data:
Depreciation Duration = 10 Years
Purchasing Cost = 10,000$
Salvage Value = Zero = 0
Selling Price = 6,000$
Calculation:
Depreciation amount for 10 years = Purchasing cost - salvage value
Depreciation amount for 10 years = 10,000 - 0
Depreciation amount for 10 years = 10,000
Annual Depreciation amount = 10,000 / 10 = 1,000$
Depreciation till the end of 5th year = 1,000 * 5
Depreciation till the end of 5th year = 5,000$
Selling Price = 6,000$
Gain on Sale till end of 5th year = Selling Price - (Purchasing - Depreciation amount till end of 5th year)
Gain on Sale till end of 5th year = 6,000 - (10,000 - 5,000)
Gain on Sale till end of 5th year = 6,000 - 1,000
Gain on Sale till end of 5th year = 1,000$
Cash Debit = 6,000$
Equipment Credit = 5,000$ (Assumed depreciation entries are being adjusted on annual basis)
