Lynn Company owns equipment that cost $120,000 when purchased on January 1, 2012

Question

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.)

(a) Sold for $58,000 on January 1, 2015. (b) Sold for $58,000 on May 1, 2015. (c) Sold for $32,000 on January 1, 2015. (d) Sold for $32,000 on October 1, 2015. Date Account Titles and Explanation Debit Credit (To record depreciation expense) (To record disposal of equipment at a gain)

Explanation / Answer

Depreciation per annum = (120000-15000)/5 = $21000 balance of accumulated depreciation-Equipment as on Jan 1, 2015 = 21000*3 = $63000 Book value as on Jan 1 2015 = 120000-(21000*3) = $57000 Date Account Head & Description Debit Amount Credit Amount a) Jan 1, 2015 Cash 58000 Accumulated depreciation-Equipment 63000 Equipment 120000 Gain on sale of equipment (balance) 1000 (to record the sale of equipment) b) May 1, 2015 Cash 58000 Accumulated depreciation-Equipment (63000+(21000*4/12)) 70000 Equipment 120000 Gain on sale of equipment (balance) 8000 (to record the sale of equipment) c) Jan 1, 2015 Cash 32000 Accumulated depreciation-Equipment 63000 Loss on sale of equipment (balance) 25000 Equipment 120000 (to record the sale of equipment) d) Oct 1, 2015 Cash 32000 Accumulated depreciation-Equipment (63000+(21000*9/12)) 78750 Loss on sale of equipment (balance) 9250 Equipment 120000 (to record the sale of equipment)

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.