Answer:
Steve Company
Entries to record the sale of the tractor will show:
Debit Cash Account with $70,000
Credit Sale of Tractor with $70,000
To record the sale
Debit Accumulated Depreciation with $72,000
Credit Sale of Tractor with $72,000
To record the transfer of accumulated depreciation.
Debit Sale of Tractor with $180,000
Credit Tractor Account with $180,000
To record the transfer of Tractor account.
Debit Loss on Sale of Tractor with $38,000
Credit Sale of Tractor with $38,000
To record the loss on sale of tractor.
Explanation:
1. Depreciation Expense for:
2019 = ($180,000 - 20,000)/10,000 x 2,400 = $38,400
2020 = ($180,000 - 20,000)/10,000 x 2,100 = $33,600
2. Accumulated Depreciation balance = $72,000 ($38,400 + 33,600)
3. Tractor account will be equal to $180,000 and this is transferred out to Sale of Tractor to account for the transaction.
4. Loss on Sale of Tractor = $38,000 ($180,000 - 72,000 - 70,000). The tractor was sold for less than its book value. The book value is the Tractor book value minus the accumulated depreciation.
