PE 10-6A Sale of equipment

Equipment was acquired at the beginning of the year at a cost of $215,000. The equipment was depreciated using the straight-line method based on an estimated useful life of 18 years and an estimated residual value of $39,500. a. What was the depreciation for the first year? b. Assuming the equipment was sold at the end of the eighth year for $128,000, determine the gain or loss on the sale of the equipment. c. Journalize the entry to record the sale.

Answer:
a.  $9,750 [($215,000 – $39,500)/18]
b.  $9,000 loss {$128,000 – [$215,000 – ($9,750 × 8)]}
c.
Cash................................................................................ 128,000
Accumulated Depreciation—Equipment ..................... 78,000
Loss on Sale of Equipment........................................... 9,000            
                                Equipment.................................................................  215,000

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