Answer:
1.
Debit Cash $47,000
Debit Accumulated depreciation account $40,800
Credit Gain on asset disposal $11,000
Credit Equipment asset $76,800
2.
Debit Cash $36,000
Debit Accumulated depreciation account $40,800
Credit Equipment asset $76,800
3.
Debit Cash $31,000
Debit Accumulated depreciation account $40,800
Debit Loss on asset disposal $5,000
Credit Equipment asset $76,800
Explanation:
To recognize gain or loss on the sale of the equipment:
First, the company calculates the carrying amount of the equipment by using the original cost of the asset, minus accumulated depreciation.
Then, subtract this carrying amount from the sale price of the equipment. If the remainder is positive, it is a gain and if the remainder is negative, it is a loss
.
In Garcia Co., the carrying amount of the equipment = $76,800 - $40,800 = $36,000
1. Garcia sells the equipment for $47,000 cash
Sale price - Carrying amount of the equipment = $47,000 - $36,000 = $11,000>0
The company records gain by entry:
Debit Cash $47,000
Debit Accumulated depreciation account $40,800
Credit Gain on asset disposal $11,000
Credit Equipment asset $76,800
2. Garcia sells the equipment for $36,000 cash
Sale price - Carrying amount of the equipment = $36,000 - $36,000 = 0
The entry to record the sale:
Debit Cash $36,000
Debit Accumulated depreciation account $40,800
Credit Equipment asset $76,800
3. Garcia sells the equipment for $31,000 cash
Sale price - Carrying amount of the equipment = $31,000 - $36,000 = -$5,000 <0
The company records loss of the sales by entry:
Debit Cash $31,000
Debit Accumulated depreciation account $40,800
Debit Loss on asset disposal $5,000
Credit Equipment asset $76,800
