Answer:
a. The company recognizes loss on the sale of the equipment $6,000
b. The entry to record the sale of the equipment:
Debit Cash $3,000
Debit Accumulated depreciation account $16,000
Debit Loss on sale equipment $6,000
Credit Equipment $25,000
Explanation:
To recognize gain or loss on the sale of the equipment:
First, the company calculates the carrying amount of the asset by using the original cost of the asset, minus all accumulated depreciation and any accumulated impairment charges.
Then, subtract this carrying amount from the sale price of the asset. If the remainder is positive, it is a gain and if the remainder is negative, it is a loss
On December 31, 2019, the carrying amount of the asset = $25,000 - $16,000 = $9,000
Sale price - Carrying amount of the asset = $3,000 - $9,000 = -$6,000
=> The company recognizes loss on the sale of the equipment $6,000
b. The entry to record the sale should be made:
Debit Cash $3,000
Debit Accumulated depreciation account $16,000
Debit Loss on sale equipment $6,000
Credit Equipment $25,000
