A company purchased equipment for $5,000 on January 1,2012.The equipment was sold for $1,000 on December 31,2015.Accumulated Depreciation in the amount of $3,000 had been recorded through that date.How would the company record this transaction?

Question

Quizplus · Accepted Answer

The equipment's book value at the time of sale is $2,000 ($5,000 cost - $3,000 accumulated depreciation). Since it was sold for $1,000, there is a loss of $1,000. The correct entry is to debit Cash for $1,000, debit Loss on Disposal of Equipment for $1,000, debit Accumulated Depreciation-Equipment for $3,000, and credit Equipment for $5,000.

A Company Purchased Equipment for $5,000 on January 1,2012