Sunland Company owns equipment that cost $73,000 when purchased on January 1, 2019. It has been depreciated using the straight-line method based on an estimated salvage value of $13,000 and an estimated useful life of 5 years. Prepare Sunland Company's journal entries to record the sale of the equipment in these four independent situations. (a) Sold for $39,000 on January 1, 2022. (b) Sold for $39,000 on May 1, 2022. (c) Sold for $22,000 on January 1, 2022. (d) Sold for $22,000 on October 1, 2022.

Answer and Explanation:

The journal entries are shown below;

(a)

Cash$39,000  

Accumulated Depreciation$36,000  [($73,000 - $13,000) × 3 ÷ 5]

       To Equipment  $73,000  

      To Gain on Sale of Equipment  $2,000  

(being the sale of equipment is recorded)    

(b)

Depreciation$4,000  [($73,000 - $13,000) ÷ 5 × 4 ÷12]

        To Accumulated Depreciation  $4,000  

(being depreciation expense is recorded)    

Cash$39,000  

Accumulated Depreciation$40,000  ($36,000 + $4,000)

          To Equipment  $73,000  

          To Gain on Sale of Equipment  $6,000  

(being the sale of equipment is recorded)      

(c)

Cash$22,000  

Accumulated Depreciation$36,000  

Loss on Sale of Equipment$15,000  

         To Equipment  $73,000  

(being the sale of equipment is recorded)    

(d)

Depreciation$9,000  [($73,000 - $13,000) ÷ 5 × 9 ÷ 12]

        To Accumulated Depreciation  $9,000  

(Being depreciation expense is recorded)    

Cash$22,000  

Accumulated Depreciation$45,000  ($36,000 + $9,000)

Loss on Sale of Equipment$6,000  

             To Equipment  $73,000  

(being sale of equipment is recorded)  

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