Stout Corp.sold some fully amortized equipment for $2,600 cash.The equipment had been purchased for $26,500 and Stout Corp.had estimated the useful life at 8 years and residual value at $3,500.The journal entry to record the sale of the equipment will include a:

Question

Quizplus · Accepted Answer

The sale of fully amortized equipment for a cash amount that is less than its carrying amount results in a loss on sale. The loss is calculated as the difference between the equipment's net book value (cost - accumulated depreciation) and the cash received. 
In this case, the equipment's net book value is:
Cost = $26,500
Accumulated depreciation = ($26,500 - $3,500) / 8 years x 7 years = $19,500
Net book value = $26,500 - $19,500 = $7,000
The cash received is $2,600. 
Therefore, the loss on sale is $7,000 - $2,600 = $4,400, which is debited to "Loss on Sale of Equipment." 
The journal entry to record the sale of the equipment is:
Cash $2,600
Loss on Sale of Equipment $4,400
Equipment $26,500
Accumulated Depreciation $19,500