On July 1, 2016, Hare Company purchased equipment for $72,000. Hare uses straight-line depreciation and estimates a six-year useful life and a $12,000 salvage value. On December 31, 2019, the equipment is destroyed by fire. The equipment is not insured.
The journal entry to record the equipment's destruction should reflect:

Question

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The cost of the equipment is $72,000 with a salvage value of $12,000, resulting in a depreciable amount of $60,000 over six years. This gives an annual depreciation of $10,000. By December 31, 2019, 3.5 years of depreciation have been recorded (half-year in 2016, plus 2017, 2018, and 2019), totaling $35,000. The book value at the time of destruction is the cost minus accumulated depreciation ($72,000 - $35,000 = $37,000). Since the equipment is fully destroyed with no salvage value or insurance recovery, the loss is the book value of the equipment at the time of destruction, which is $37,000.

On July 1, 2016, Hare Company Purchased Equipment for $72,000