Pryce Company owns equipment that cost $65,000 when purchased on January 1, 2012. It has been depreciated using the straight-lin
e method based on an estimated salvage value of $5,000 and an estimated useful life of 5 years. InstructionsPrepare Pryce Company's journal entries to record the sale of the equipment in these four independent situations. (a) Sold for $31,000 on January 1, 2015. (b) Sold for $31,000 on May 1, 2015. (c) Sold for $11,000 on January 1, 2015. (d) Sold for $11,000 on October 1, 2015
Monthly depreciation is calculated as follows: 65,000 (Cost) – 5,000 (Salvage Value) ÷ 60 (5 years X 12 months per year) = 1,000 in depreciation per month.
a) Accumulated depreciation from 1/1/12 to 1/1/15 is 36,000 (12 months for 2012, 2013, & 2014). Assuming that sale was a Cash sale, the journal entry would look like this: 1/1/15 Cash (DR) 31,000 Accumulated Depreciation (DR) 36,000 Equipment (CR) 65,000 Gain on Sale of Equipment (CR) 2,000
b) Accumulated depreciation from 1/1/12 to 5/1/15 is 40,000 (12 months for 2012, 2013, 2014, & 4 months for 2015). Assuming that sale was a Cash sale, the journal entry would look like this: 5/1/15 Cash (DR) 31,000 Accumulated Depreciation (DR) 40,000 Equipment (CR) 65,000 Gain on Sale of Equipment (CR) 6,000
c) Accumulated depreciation from 1/1/12 to 1/1/15 is 36,000 (12 months for 2012, 2013, & 2014). Assuming that sale was a Cash sale, the journal entry would look like this: 1/1/15 Cash (DR) 11,000 Accumulated Depreciation (DR) 36,000 Loss on Sale of Equipment (DR) 18,000 Equipment (CR) 65,000
d) Accumulated depreciation from 1/1/12 to 10/1/15 is 45,000 (12 months for 2012, 2013, 2014, & 9 months for 2015). Assuming that sale was a Cash sale, the journal entry would look like this: 10/1/15 Cash (DR) 11,000 Accumulated Depreciation (DR) 45,000 Loss on Sale of Equipment (DR) 9,000 Equipment (CR) 65,000
