Francis Company owns equipment that cost $50,000 when purchased on January 1, 20

Question

Francis Company owns equipment that cost $50,000 when purchased on January 1, 2011. It has been depreciated using the straight-line method based on estimated salvage value of $8,000 and an estimated useful life of 5 years. Prepare Francis 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 O decimal places e.g. 125.) (a) Sold for $28,000 on January 1, 2014. (b) Sold for $28,000 on May 1, 2014. (c) Sold for $11,000 on January 1, 2014. (d) Sold for $11,000 on October 1, 2014 No. Account Titles and Explanation Debit Credit (To record depreciation)

Explanation / Answer

Francis Company's Journal entries to record the sale of equipment Workings:- Depreciation of the equipment per annum ($ 50,000-$ 8,000)/ 5years $                8,400 per year Situation (a) Sold for $ 28,000 on January 1, 2014 Notes: Accumulated depreciation Depreciation up to January 1, 2014 ($ 8,400 x 3 years) $              25,200 Current year depreciation $                         - Accumulated depreciation $              25,200 Journal Entries Debit Credit 01 January 2014 Cash account $              28,000 Accumulated depreciation- Equipment account $              25,200 Equipment account $                      50,000 Gain on sale of equipment account $                        3,200 (sale of equipment) Situation (b) Sold for $ 28,000 on May 1, 2014 Notes: Accumulated depreciation Depreciation up to January 1, 2014 ($ 8,400 x 3 years) $              25,200 Current year depreciation $ 8,400 per year for 4 months $                2,800 Accumulated depreciation $              28,000 Journal Entries Debit Credit 01 May 2014 Depreciation -Equipment accont $                2,800 Accumulated depreciation- Equipment account $                        2,800 (To Record Depreciation) Journal Entries Debit Credit 01 January 2014 Cash account $              28,000 Accumulated depreciation- Equipment account $              28,000 Equipment account $                      50,000 Gain on sale of equipment account $                        6,000 (sale of equipment) Situation (c) Sold for $ 11,000 on January 1, 2014 Notes: Accumulated depreciation Depreciation up to January 1, 2014 ($ 8,400 x 3 years) $              25,200 Current year depreciation $                         - Accumulated depreciation $              25,200 Journal Entries Debit Credit 01 January 2014 Cash account $              11,000 Accumulated depreciation- Equipment account $              25,200 Loss on sale of equipment account $              13,800 Equipment account $                      50,000 (sale of equipment) Situation (b) Sold for $ 11,000 on October 1, 2014 Notes: Accumulated depreciation Depreciation up to January 1, 2014 ($ 8,400 x 3 years) $              25,200 Current year depreciation $ 8,400 per year for 9 months $                6,300 Accumulated depreciation $              31,500 Journal Entries Debit Credit 01 October 2014 Depreciation -Equipment accont $                6,300 Accumulated depreciation- Equipment account $                        6,300 (To Record Depreciation) Journal Entries Debit Credit 01 October 2014 Cash account $              11,000 Accumulated depreciation- Equipment account $              31,500 Loss on sale of equipment account $                7,500 Equipment account $                      50,000 (sale of equipment)

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