Question

Shown below are the T-accounts relating to equipment that was purchased for cash by a company on the first day of the current year. The equipment was depreciated on a straight-line basis with an estimated useful life of 10 years and a salvage value of $80. Part of the equipment was sold on the last day of the current year for cash proceeds. Dec. 31 Jan. 1 458 Cas Jan. 1 464 Equipment 1,030 Dec. 31 Accumulated Depreciation Equipment Dec. 31 50 Dec. 31 Depreciation Expense (b) Gain on Disposal of Plant Assets Dec. 31 Dec. 31 Dec. 31 Prepare the journal entry to record sale of part of the equipment on December 31. (Credit account titles is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titi Date Account Tities and Explanation Debit Credit Dec. 31 What was the gain on disposal? Gain on Disposal of Plant Assets Dec. 31 Ctrl) - 10:47 PM RA 2/21/2020

Answer 1

Cost price of equipment purchased on 1st January of current year is $ 1,030

Estimated useful life = 10 years

Salvage value of the equipment = $ 80

Annual depreciation on equipment under straight line method = [ original cost + installation charges - salvage value] / no of working life in years

Annual depreciation = [$ 1,030 + $ 0 - $ 80] / 10 = $ 95

Cash received $ 464 for selling an equipment having a book value of $ 458 less accumulated depreciation of $ 50 so gain on disposal of plant assets =$ 464 - {$ 458 - $ 50} = $ 56

Journal entry

Date	Particulars	Debit	Credit
31 December of current year	Cash	$ 464
	Accumulated depreciation	$ 50
	Equipment		$ 458
	Gain on disposal of plant assets		$ 56

What was the gain of plant disposal?

Gain on disposal of plant assets

Particulars	Amounts ( $)	Particulars	Amounts ( $)
		31 December	$ 56