Asked by Chasity Fields on May 08, 2024
Verified
Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000.Gaston sells the equipment for $26,000.Which of the following would not be part of the journal entry to record the disposal of the equipment?
A) Debit Accumulated Depreciation $61,000.
B) Credit Equipment $90,500.
C) Debit Loss on Disposal of Equipment $3,500.
D) Credit Gain on Disposal of Equipment $3,500.
E) Debit Cash $26,000.
Accumulated Depreciation
The aggregate depreciation charged on a fixed asset since its acquisition.
Loss on Disposal
A financial loss that occurs when an asset is sold for less than its carrying amount on the books.
Gain on Disposal
The profit earned from selling a capital asset for more than its book value.
- Recognize and compute the profit or deficit incurred from the disposition of fixed assets.
Verified Answer
NB
Naveen bilidaleMay 14, 2024
Final Answer :
D
Explanation :
The correct journal entry to record the disposal of equipment includes removing the equipment at its original cost (Credit Equipment $90,500), removing the accumulated depreciation (Debit Accumulated Depreciation $61,000), recording the cash received (Debit Cash $26,000), and recognizing a loss if the sale proceeds are less than the book value of the asset. In this case, the book value of the equipment is $90,500 - $61,000 = $29,500, and it was sold for $26,000, resulting in a loss of $3,500 (Debit Loss on Disposal of Equipment $3,500). Therefore, crediting a gain on disposal of equipment would not be correct since the equipment was sold at a loss, not a gain.
Learning Objectives
- Recognize and compute the profit or deficit incurred from the disposition of fixed assets.
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