Answer:
Dr cash $25,200
Dr accumulated depreciation $13,000
Cr equipment $37,000
Cr profit on disposal $1,2000
Explanation:
The yearly depreciation expense on the equipment is computed thus:
depreciation=(cost-residual value)/useful life
cost=$37000
residual value=$4,500
useful life= 5 years
depreciation=($37000-$4500)/5
depreciation=$6,500
accumulated depreciation for 2 years=$6,500*2=$13,000
Cash proceeds from disposal=$25,200
Upon disposal, we would debit cash with $25,200 as well as accumulated depreciation with $13,000 while the equipment account is credited with the original cost of $37,000
Total debits=$25,200+$13,000=$38,200
total credit=$37,000
profit on disposal=$38,200-$37000=$1,200
