On December 31, 2018, ABC company sold its equipment for cash for $10,000. ABC company had acquired this equipment for $20,000 on January 1, 2016 after paying cash. It estimated a useful life of 4 years and a salvage value of $4,000 to arrive at the deprecation expense for each year. What journal entry would the company make on the day that the disposal of equipment is complete. A. Debit A/D12,000; Credit cash 10,000; Credit Gain on sale 10,000; Credit Equip 20,000 B. Debit A/D12,000; Debit cash 10,000; Credit Gain on sale 2,000; Credit Equip 20,000 C. Debit A/D 4,000; Credit cash 10,000; Debt Loss on sale 10,000; Credit Equip 20,000 D. Debit A/D12,000; Credit cash 10,000; Credit Gain on sale 10,000; Debit Equip 20,000
On December 31, 2018, ABC company sold its equipment for cash for $10,000. ABC company had acquired this equipment for $20,000 on January 1, 2016 after paying cash. It estimated a useful life of 4 years and a salvage value of $4,000 to arrive at the deprecation expense for each year. What journal entry would the company make on the day that the disposal of equipment is complete. A. Debit A/D12,000; Credit cash 10,000; Credit Gain on sale 10,000; Credit Equip 20,000 B. Debit A/D12,000; Debit cash 10,000; Credit Gain on sale 2,000; Credit Equip 20,000 C. Debit A/D 4,000; Credit cash 10,000; Debt Loss on sale 10,000; Credit Equip 20,000 D. Debit A/D12,000; Credit cash 10,000; Credit Gain on sale 10,000; Debit Equip 20,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:On December 31, 2018, ABC company sold
its equipment for cash for $10,000. ABC
company had acquired this equipment for
$20,000 on January 1, 2016 after paying
cash. It estimated a useful life of 4 years
and a salvage value of $4,000 to arrive at
the deprecation expense for each year.
What journal entry would the company
make on the day that the disposal of
equipment is complete.
A. Debit A/D12,000; Credit cash 10,000;
Credit Gain on sale 10,000; Credit Equip
20,000
B. Debit A/D12,000; Debit cash 10,000;
Credit Gain on sale 2,000; Credit Equip
20,000
C. Debit A/D 4,000; Credit cash 10,000;
Debt Loss on sale 10,000; Credit Equip
20,000
D. Debit A/D12,000; Credit cash 10,000;
Credit Gain on sale 10,000; Debit Equip
20,000
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