The balance sheet of Doorbell Ltd at 31 December 2014 showed:
$
Equipment 80 000
Accumulated depreciation of equipment 63 000
17 000
On 1 January 2015 the equipment was sold for $15 000.The accounting entry to record the closing of the equipment and the accumulated depreciation of equipment accounts is which of the following?

Question

Quizplus · Accepted Answer

When the equipment is sold, we need to remove both its carrying amount and its accumulated depreciation from the balance sheet. The carrying amount is the difference between the original cost of the equipment and the accumulated depreciation over time. Therefore:

Carrying amount of equipment = Equipment - Accumulated depreciation of equipment = 80,000 - 63,000 = 17,000

To record the sale of the equipment, we need to credit the equipment account with its original cost (80,000) and debit both the accumulated depreciation account (63,000) and the carrying amount of equipment (17,000). The difference between the sale price and the carrying amount of equipment (15,000 - 17,000 = -2,000) represents a loss on the sale of the equipment, which can be included in the income statement.

Therefore, the accounting entry to record the sale of the equipment is:

Debit Accumulated depreciation of equipment $63,000 
Debit Carrying amount of equipment $17,000 
Credit Equipment $80,000

The Balance Sheet of Doorbell Ltd at 31 December 2014