Carlton Company sold equipment for $3,700 that originally cost $22,000.The balance of the Accumulated Depreciation account related to this equipment was $19,000.The entry to record the disposal of this equipment would include a

Question

Quizplus · Accepted Answer

CThe correct journal entry to record the disposal of the equipment would include removing the equipment at its original cost ($22,000), removing the accumulated depreciation ($19,000), recording the cash received ($3,700), and recognizing the gain on the sale. The gain is calculated as the difference between the cash received and the net book value of the equipment (original cost minus accumulated depreciation), which is $3,700 - ($22,000 - $19,000) = $700. Therefore, a credit to Gain on Sale of Equipment of $700 is correct because it reflects the gain on the transaction. Additionally, a credit to Equipment of $3,000 is incorrect; the correct entry should remove the equipment at its original cost, which would be a credit to Equipment of $22,000, not $3,000.

Carlton Company Sold Equipment for $3,700 That Originally Cost $22,000