Answer:
Berning Company
Journal Entry to record the sale of Tractor:
Jan. 1, 2021:
Debit Sale of Tractor $540,000
Credit Equipment (Tractor) $540,000
To transfer the cost of tractor to Sale of Tractor.
Debit Accumulated Depreciation - Tractor $216,000
Credit Sale of Tractor $216,000
To transfer the depreciation to Sale of Tractor.
Debit Cash Account $210,000
Credit Sale of Tractor $210,000
To record the cash receipts from the sale.
Explanation:
a) Determination of Accumulated Depreciation for the Tractor:
Depreciable amount = $480,000 ($540,000 - $60,000)
Depreciable rate = $48 ($480,000/10,000) per hour
2019 Depreciation Expense = $115,200 ($48 x 2,400)
2020 Depreciation Expense = $100,800 ($48 x 2,100)
Accumulated Depreciation = $216,000
b) Calculation of the Book Value = Cost - Accumulated Depreciation
= $540,000 - $216,000 = $324,000
c) Gain or Loss on Sale: The sales proceed is compared with the book value to determine if there is a gain or loss from the sale. In this case, there is a loss of $114,000 ($324,000 - $210,000), which will be transferred to the Income Summary.
