Question

Abbott Landscaping purchased a tractor at a cost of $35,000 and sold it three years later for $17,500. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $2,000 residual value. Tractors are included in the Equipment account. 2. Assume the tractor was sold for $10,900 instead of $17,500. Record the sale

Answer 1

Answer:

Cash Dr $10,900

Accumulated depreciation $19,800

Loss on sale of equipment $4,300

            To Equipment $35,000

(Being the sale is recorded)

Explanation:

The journal entry is shown below:

Cash Dr $10,900

Accumulated depreciation $19,800

Loss on sale of equipment $4,300

            To Equipment $35,000

(Being the sale is recorded)

The computation is shown below:

= ($35,000 - $2,000) ÷ 5 years × 3 years

= $19,800

Since the sale is made so we debited the cash for $10,900 and along with it the accumulated depreciation is also debited plus the purchase value of equipment is credited and the balancing figure is transferred to the loss on sale of equipment