A company sells a piece of equipment half-way through the accounting period. The

Question

A company sells a piece of equipment half-way through the accounting period. The straight-line rate of depreciation on the equipment is $40,000 per year. Before preparing the entry to record the sale of the equipment, the company should first debit:

A. Depreciation Expense for $40,000 and credit Accumulated Depreciation for $40,000.

B. Accumulated Depreciation for $40,000 and credit Cash for $40,000.

C. Depreciation Expense for $20,000 and credit Accumulated Depreciation for $20,000.

D. Cash for $20,000 and credit Depreciation Expense for $20,000.

Explanation / Answer

Hi Dear Student !

Answer for this Problem is 'C'

Company uses the equipment for half year so depreciation expense would be allowed for half year only. Full year depreciation is given $40000 so half year depreciation would be 40000/2= $20000. Entry for the same would be as follows:

Deperciation Expense A/c ..Dr 20000   
To Accumulated Dep. A/c. 20000
(Being Dep. Recorded)

I hope it will help you. Pleasure Teaching you.

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