Q42. Sale of noncurrent assets
Entity A sold equipment with the following information.
(a) Cost of equipment = $200,000
(b) Accumulated depreciation = $180,000
(c) The equipment was sold at $23,000 in cash.
Prepare a journal entry to record this transaction.
A42. Gain on sale of equipment = cash receipt – book value of equipment
| Debit | Credit | |
| Cash | 23,000 | |
| Accumulated depreciation | 180,000 | |
| Equipment | 200,000 | |
| Gain on sale of equipment | 3,000 |
[Note]
1. Decrease in accumulated depreciation (contra-asset): debit
2. Decrease in equipment (asset): credit
3. Increase in the gain on sale of equipment (gain): credit
4. Book value of equipment = cost – accumulated depreciation
= $200,000 – $180,000 = $20,000
5. Gain on sale of equipment = cash receipt – book value of equipment
= $23,000 – $20,000 = $3,000
[Exercise]
Entity B sold equipment with the following information.
(a) Cost of equipment= $300,000
(b) Accumulated depreciation = $270,000
(c) The equipment was sold at $28,000 in cash.
| Debit | Credit | |
| Cash | 28,000 | |
| Accumulated depreciation | 270,000 | |
| Loss on sale of equipment | 2,000 | |
| Equipment | 300,000 |
[Note]
1. Increase in the loss on sale of equipment (loss): debit
2. Book value of equipment = cost – accumulated depreciation
= $300,000 – $270,000 = $30,000
3. Loss on sale of equipment = book value of equipment – cash receipt
= $30,000 – $28,000 = $2,000