### Accounting for Disposal of Equipment**Scenario:**Counselors of Mableton purchased equipment on January 1, 2017, for $44,500. They expected the equipment to last for eight years with a residual value of $4,500. The equipment was sold for $25,700 on December 31, 2020, after being used for four years. Assume straight-line depreciation was used and that depreciation for 2020 has been recorded.**Steps to Calculate Gain or Loss on Disposal:**1. **Market Value of Assets Received:** - $25,7002. **Book Value of Asset Disposed:** - **Cost:** $44,500 - **Less: Accumulated Depreciation:** - (Depreciation per year: $\frac{44,500 - 4,500}{8} = 5,000$) - Accumulated Depreciation for 4 years: $5,000 \times 4 = 20,000$ - **Book Value:** $44,500 - 20,000 = 24,500$3. **Gain or Loss Calculation:** - Selling Price: $25,700 - Book Value: $24,500 - **Gain or (Loss):** $25,700 - 24,500 = 1,200$Thus, the gain on the disposal of the equipment is $1,200.---**Illustration of the Calculation:**```Market value of assets received: $25,700Less: Book value of asset disposed of: - Cost: $44,500 - Less: Accumulated Depreciation: $20,000---------------------------------------------------------------------- = Book Value: $24,500Gain or (Loss): $ 1,200```This gain results from selling the equipment for more than its book value at the time of sale. Thus, the transaction reflects positively on the financial statements for the year.

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Description: ### Accounting for Disposal of Equipment**Scenario:**Counselors of Mableton purchased equipment on January 1, 2017, for $44,500. They expected the equipment to last for eight years with a residual value of $4,500. The equipment was sold for $25,700

Annual depreciation = (Cost of the assets - Residual value) / Life of the assets

Business

Accounting

3. Counselors of Mableton purchased equipment on January 1, 2017, for $44,500. Counselors of Mableton expected the equipment to last for eight years and have a residual value of $4,500. Suppose Counselors of Mableton sold the equipment for $25,700 on December 31, 2020, after using the equipment for four full years. Assume depreciation for 2020 has been recorded. Journalize the sale of the equipment, assuming straight-line depreciation was used. First, calculate any gain or loss on the disposal of the equipment. Market value of assets received 25,700 Less: Book value of asset disposed of Cost 44,500 Less: Accumulated Depreciation Gain or (Loss)

3. Counselors of Mableton purchased equipment on January 1, 2017, for $44,500. Counselors of Mableton expected the equipment to last for eight years and have a residual value of $4,500. Suppose Counselors of Mableton sold the equipment for $25,700 on December 31, 2020, after using the equipment for four full years. Assume depreciation for 2020 has been recorded. Journalize the sale of the equipment, assuming straight-line depreciation was used. First, calculate any gain or loss on the disposal of the equipment. Market value of assets received 25,700 Less: Book value of asset disposed of Cost 44,500 Less: Accumulated Depreciation Gain or (Loss)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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