Exercise 9-10 Pryce Company owns equipment that cost $70,200 when purchased on J

Question

Exercise 9-10

Pryce Company owns equipment that cost $70,200 when purchased on January 1, 2014. It has been depreciated using the straight-line method based on an estimated salvage value of $4,700 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. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Sold for $10,500 on October 1, 2017.

(a) Sold for $34,300 on January 1, 2017. (b) Sold for $34,300 on May 1, 2017. (c) Sold for $10,500 on January 1, 2017. (d)

Sold for $10,500 on October 1, 2017.

No. Account Titles and Explanation Debit Credit To record depreciation) (To record sale of equipment)

Explanation / Answer

The deprecaition per year=(total cost-salvage value)/no of useful years
=(70200-4700)/5
=13100
a)Till jan 2017 the accumualted depreciation=3*13100=39300
Book value=70200-39300=30900
Sold for 34300

Depreciation expense(db) 39300

Accumulated depreciation(cr) 39300
Cash(db) 34300
Accumulated depreciation(db) 39300
Equipment(cr) 70200
Gain on sale (cr) 3400

b) sold for 34300 in may 2017

For jan to may 2017 the depreciation=(4/12)*13100=4367

Depreciation expense(db) 43667

Accumulated depreciation(cr) 43667

Cash(db) 34300
Accumulated depreciation(db) 39300+4366.67=43667
Equipment(cr) 70200
Gain on sale (cr) 7767

c)Sold for 10500 on jan 1st 2017

Depreciation expense(db) 39300

Accumulated depreciation(cr) 39300

Cash(db) 10500
Accumulated depreciation(db) 39300
Equipment(cr) 70200
loss on sale (db) 20400

d)Sold for 10500 on oct 1st 2017
For jan to oct 2017 the depreciation=(9/12)*13100=9825

Depreciation expense(db) 49125

Accumulated depreciation(cr) 49125

Cash(db) 10500
Accumulated depreciation(db) 39300+9825=49125
Equipment(cr) 70200
loss on sale (db) 10575

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