Question

how is the sale of equipment at an amount greater than its book value recorded? How would the answer change if the equipment is sold at an amount less than its book value?

Answer 1

Lets first analysis the initial part.

In case of sale of an equipment at a price greater than its book value, then it results in a gain or profit on sale of an equipment. Hence, this gain needs to be transferred to profit and loss account.

For example :

If the book value is $ 100000

and sales price is $120000

The resulting profit or gain of $20000 has to be transferred to profit and loss account.

Journal entry for the same will be

Debit Bank Account $120000

Credit Equipment Account $100000

Credit Profit and loss Account $20000

In case if the equipment is sold less than its book value, then the loss on sale of equipment need to be transferred to Profit and Account.

For example:

Book value $100000

Sales price $90000

Loss $10000

Journal entry will be

Debit Bank Account $90000

Debit Profit and loss Account $10000

Credit Equipment Account $100000

Hence, the book value of the asset will be reduced from the Balance Sheet and the resulting profit or loud will be transferred to Profit and Loss Account.