Sale of Plant Asset Shannon Company has a equipment that originally cost $68,000. Depreciation has been recorded for six years using the straight-line method, with a $9,000 estimated salvage value at the end of an expected eight-year life. After recording depreciation at the end of six years, Shannon sells the equipment. Prepare the journal entry to record the equipment’s sale for (Round to the nearest dollar): a. $30,000 cash b. $23,750 cash c. $21,000 cash General Journal Date Description Debit Credit a. Cash Equipment To record sale of equipment. b. Cash To record sale of equipment. c. Cash Accumulated Depreciation - Equipment To record sale of equipment.
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.
Sale of Plant Asset
Shannon Company has a equipment that originally cost $68,000.
| a. | $30,000 | cash |
| b. | $23,750 | cash |
| c. | $21,000 | cash |
| General Journal | |||
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| Date | Description | Debit | Credit |
| a. | Cash |
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| Equipment |
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| To record sale of equipment. | |||
| b. | Cash |
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| To record sale of equipment. | |||
| c. | Cash |
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| To record sale of equipment. |
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