Equipment was purchased for $24,000 on January 1, 2016
The equipment's estimated useful life was five years, and its residual value was $4,000. The straight-line method of depreciation was used. Calculate the gain or loss on sale if the equipment is sold for $18,000 on December 31, 2016, the end of the accounting period. Prepare the journal entry to record the sale of equipment.
What will be an ideal response
Cash 18,000
Accumulated Depreciation—Equipment* 4,000
Loss on Disposal 2,000
Equipment 24,000
*Accumulated Depreciation: Asset was held for 1 year
Annual Depreciation: Cost - residual value / useful life
$24,000 - 4,000 / 5 years = $4,000
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