On December 31,2018,Far Niente Winery sold a wine press for $545,000;the wine press had originally cost $900,000.Cash was paid by the buyer of the press.Accumulated Depreciation on the press,updated to the date of disposal,was $450,000. What is the effect of the sale on the balance sheet and income statement of Far Niente reported as of and for the year ended December 31,2018?

Question

Quizplus · Accepted Answer

Gain (loss)= Proceeds from sale − Book value of equipment
= $545,000 − ($900,000 − $450,000)= $95,000
Entry to record sale: Debit Cash (to increase that asset account)for $450,000,debit Accumulated Depreciation (to decrease that contra-asset account)for $545,000,credit Gain on Disposal for $95,000 (calculated above),and credit Equipment (to decrease that asset account)for $900,000
Assets increase by $95,000 (or $450,000 + $545,000 − $900,000)and the gain on the sale increases net income by $95,000.

On December 31,2018,Far Niente Winery Sold a Wine Press for $545,000;the