Q42. Sale of noncurrent assets
Entity A sold equipment with the following information.
(a) Cost of equipment = $200,000
(b) Accumulated depreciation = $180,000
(c) The equipment was sold at $23,000 in cash.
Prepare a journal entry to record this transaction.

A42. Gain on sale of equipment = cash receipt – book value of equipment

  Debit Credit
Cash 23,000  
Accumulated depreciation 180,000  
     Equipment   200,000
     Gain on sale of equipment   3,000

[Note]
1. Decrease in accumulated depreciation (contra-asset): debit
2. Decrease in equipment (asset): credit
3. Increase in the gain on sale of equipment (gain): credit
4. Book value of equipment = cost – accumulated depreciation
= $200,000 – $180,000 = $20,000
5. Gain on sale of equipment = cash receipt – book value of equipment
= $23,000 – $20,000 = $3,000

[Exercise]
Entity B sold equipment with the following information.
(a) Cost of equipment= $300,000
(b) Accumulated depreciation = $270,000
(c) The equipment was sold at $28,000 in cash.

  Debit Credit
Cash 28,000  
Accumulated depreciation 270,000  
Loss on sale of equipment 2,000  
     Equipment   300,000

[Note]
1. Increase in the loss on sale of equipment (loss): debit
2. Book value of equipment = cost – accumulated depreciation
= $300,000 – $270,000 = $30,000
3. Loss on sale of equipment = book value of equipment – cash receipt
= $30,000 – $28,000 = $2,000

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