Question

Oriole Company sells office equipment on July 31, 2022, for $20,280 cash. The office equipment originally cost $78,950 and as of January 1, 2022, had accumulated depreciation of $38,410. Depreciation for the first 7 months of 2022 is $4,410. Prepare the journal entries to (a) update depreciation to July 31, 2022, and (b) record the sale of the equipment. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Answer:

a. The journal entries to update depreciation to July 31, 2022

Debit Depreciation expense $4,410

Credit Accumulated depreciation account $4,410

b.The entry records the sale of the equipment

Debit Cash $20,280

Debit Accumulated depreciation account $42,820

Debit Loss on asset disposal  $15,850

Credit Equipment asset $78,950

Explanation:

a. The journal entries to update depreciation to July 31, 2022

Debit Depreciation expense $4,410

Credit Accumulated depreciation account $4,410

b.

Accumulated depreciation on July 31, 2022 = $38,410 + $4,410 = $42,820

Carrying amount of the equipment = Originally cost of the equipment - Accumulated depreciation = $78,950 - $42,820 = $36,130

Sales price - Carrying amount of the equipment  = $20,280 - $36,130 = -$15,850 <0

The company recognizes loss on the sale $15,850

The entry records the sale of the equipment

Debit Cash $20,280

Debit Accumulated depreciation account $42,820

Debit Loss on asset disposal  $15,850

Credit Equipment asset $78,950