In 2022 Blanchard Corporation has plant equipment that originally cost $120000 and has accumulated depreciation of $48000.A new processing technique has rendered the equipment obsolete so it is retired.Which of the following should Blanchard do to record the retirement of the equipment?

Question

Quizplus · Accepted Answer

When the equipment is retired or disposed of, the cost and accumulated depreciation of the equipment must be removed from the financial statements. The cost of the equipment is $120,000, and the accumulated depreciation is $48,000. The loss on disposal can be calculated as ($120,000 - $48,000) - $0 = $72,000.

Therefore, we need to decrease the Accumulated Depreciation - Equipment account by $48,000, increase the Loss on Disposal account by $72,000, and decrease the Equipment account by $120,000.

Option A is incorrect because it only records the decrease in the Equipment account, without accounting for the accumulated depreciation or the loss on disposal.

Option C is incorrect because it only records the increase in the Loss on Disposal account without accounting for the decrease in the Equipment account or the accumulated depreciation.

Option D is incorrect because it records an increase in the Equipment account and Accumulated Depreciation - Equipment account, which is not appropriate when the equipment is retired or disposed of.

In 2022 Blanchard Corporation Has Plant Equipment That Originally Cost