Pryce Company owns equipment that cost $65,700 when purchased on January 1, 2011

Question

Pryce Company owns equipment that cost $65,700 when purchased on January 1, 2011. It has been depreciated using the straight-line method based on estimated salvage value of $7,000 and an estimated useful life of 5 years.

Prepare Pryce Company’s journal entries to record the sale of the equipment in these four independent situations. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g.125.)

(a) Sold for $36,220 on January 1, 2014. (b) Sold for $36,220 on May 1, 2014. (c) Sold for $10,090 on January 1, 2014. (d) Sold for $10,090 on October 1, 2014.

Explanation / Answer

Depreciation= (Cost-Salvage Value)/Useful Life

Depreciation per annum= (65,700-7000)/60months=$978 depreciation per month:

(a) Sold for $36,220 on January 1, 2014.
978 x 36 months = 27,000 accum. depr.
Dr Cash 36,220
Dr Accumulated Depreciation 35,220
Cr Equipment 65,700
Cr Gain on Disposal 5,740

(b) Sold for $36,220 on May 1, 2014.
978.3 x 40 months =39,133

accum. depr.

Dr Cash 36,220
Dr Accumulated Depreciation 39,133
Cr Equipment 65,700
Cr Gain on Disposal 9,653

(c) Sold for $10,090 on January 1, 2014.
Dr Cash 10,090
Dr Accumulated Depreciation 35,208
Dr Loss on Disposal 20,402
Cr Equipment 65,700

(d) Sold for $10,090 on October 1, 2014.
978 x 45 months = 44,010 accum. depr.
Dr Cash 10,090
Dr Accumulated Depreciation 44,010
Dr Loss on Disposal 11,600
Cr Equipment 65,700

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