Answer:
The journals to be recorded are as follows:
(a) Debit Accumulated depreciation $41,000
Credit Equipment $41,000
(b) Debit Accumulated depreciation $37,200
Debit Loss on disposal [$41,000 - $37,200] $3,800
Credit Equipment $41,000
(To recognize the disposals of the company's equipment)
Explanation:
Retiring company's asset otherwise means to dispose of the assets. Disposal of an asset can be as a result of being fully depreciated, wear and tear, obsolescence, new technological improvement, idleness of the assets, etc.
(a) In part (a) of the question, the asset was fully depreciated without salvage value, so there is zero gain or loss on disposal. The relevant accounting entries are as recorded above.
(b) Here, the accumulated depreciation was less than the cost, meaning the asset was not fully depreciated, which can be as a result of any of the reasons cited above. The company therefore realized a loss of $3,800 upon disposal.
