Exercise 758 Algorithmic Disposal of Fixed Asset Perfect Aut

Exercise 7-58 (Algorithmic) Disposal of Fixed Asset Perfect Auto Rentals sold one of its cars on January 1 2019 Perfect had acquired the car on January 1, 2017, for?13 500·At acquisition Perfect assumed that the car would have an estimated life of 3 years and a residual value of 3.000 Assume that Perfect has recorded straight-line depreciation expense for 2017 and 2018. Required: Prepare the lournal entry to record the sale of the car assuming the car sold for(a) 6,500 cash, (b) $4,000 cash, and (c) $7,000 cash. The company recorded the car as equipment. If no entry is required, leave the answer boxes blank. Record sale of car b. Record sale of car Record sale of car

Solution

Cost of equipment 13500 Less: Salvage value 3000 Depreciable amount 10500 Life 3 Annual depreciation 3500 Accumulated depreciation for 2 years 7000 Book value as on Jan 1 2019 6500 Journal entries: Case-1 Sold for $6500 Cash account Dr. 6500 Accumulated depreciation Dr. 7000       Equipment Account 13500 Case-2 Sold for $4000 Cash account Dr. 4000 Accumulated depreciation Account Dr. 7000 Loss on Sale of assets Dr. 2500        Equipment Account 13500 Case-3 Sold for 7000 Cash Account Dr. 7000 Accumulated depreciation Account Dr. 7000       Equipment Account 13500       Gain on Sale of Assets 500