Additional Exercise 261 Lynn Company owns equipment that cost $120,000 when purc
ID: 2396892 • Letter: A
Question
Additional Exercise 261
Lynn Company owns equipment that cost $120,000 when purchased on January 1, 2012. It has been depreciated using the straight-line method based on estimated salvage value of $15,000 and an estimated useful life of 5 years.
Prepare Lynn Company's journal entries to record the sale of the equipment in these four independent situations. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Sold for $32,000 on October 1, 2015
Date
Account Titles and Explanation
Debit
Credit
(a)
Additional Exercise 261
Lynn Company owns equipment that cost $120,000 when purchased on January 1, 2012. It has been depreciated using the straight-line method based on estimated salvage value of $15,000 and an estimated useful life of 5 years.
Prepare Lynn Company's journal entries to record the sale of the equipment in these four independent situations. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Sold for $32,000 on October 1, 2015
Date
Account Titles and Explanation
Debit
Credit
(a)
(b) (To record depreciation expense) (To record disposal of equipment at a gain) (c) (d) (To record depreciation expense) (To record disposal of equipment at a loss)Explanation / Answer
Annual Depreciation under straight line = (Cost - Salvage Value)/Useful life
= ($120,000 - $15,000)/5 yrs = $21,000 per year
Depreciation charged from 1/1/12 to 12/31/14 = $21,000*3 years = $63,000
Journal Entries to record the sale are shown as follows: (Amounts in $)
Date Account Titles and Explanation Debit Credit a) Jan 1, 2015 Cash 58,000 Accumulated Depreciation-Equipment 63,000 Gain on disposal of Equipment (Bal. fig.) 1,000 Equipment 120,000 b) May 1, 2015 Depreciation Expense ($21,000*4/12) 7,000 Accumulated Depreciation-Equipment 7,000 (To record depreciation expense) May 1, 2015 Cash 58,000 Accumulated Depreciation-Equipment (63,000+7,000) 70,000 Gain on disposal of Equipment (Bal. fig.) 8,000 Equipment 120,000 (To record disposal of equipment at a gain) c) Jan 1, 2015 Cash 32,000 Accumulated Depreciation-Equipment 63,000 Loss on disposal of Equipment (Bal. fig.) 25,000 Equipment 120,000 d) Oct 1, 2015 Depreciation Expense ($21,000*9/12) 15,750 Accumulated Depreciation-Equipment 15,750 (To record depreciation expense) Oct 1, 2015 Cash 32,000 Accumulated Depreciation-Equipment (63,000+15,750) 78,750 Loss on disposal of Equipment (Bal. fig.) 9,250 Equipment 120,000 (To record disposal of equipment at a loss)Related Questions
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