Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of

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Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of

$5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the equipment is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include a:
A) Credit to cash for $20,000.
B) Debit to accumulated depreciation for $22,500.
C) Debit to loss on sale for $10,000.
D) Credit to loss on sale for $10,000

Business

1 answer:

arsen [3.4K] · Answer 1 · 2026-03-28T13:14:20+03:00

Answer:

B) A debit entry to accumulated depreciation amounting to $22,500.

Explanation:

Based on the data provided,

Using the straight-line method, annual depreciation is calculated as ($45,000 - $5,000)/8 = $5,000 per year.

Over a period of 4 years, depreciation totals $5,000 $\times$ 4 = $20,000

For the 5th year, the depreciation for 6 months is $5,000/2 = $2,500

The cumulative depreciation by July 1 of Year 5 equals $20,000 + $2,500 = $22,500

The book value of the equipment at the time of sale stands at $45,000 - $22,500 = $22,500

The equipment was sold for $20,000

The profit or loss from the sale is calculated as $20,000 - $22,500 = - $2,500

Consequently, there is a loss of $2,500

Therefore, options c and d are not valid choices.

Moreover, any cash received from the sale is recorded as a debit, making option a incorrect as well.

The total accumulated depreciation equals $22,500

Thus, the appropriate journal entry includes a debit to accumulated depreciation for the amount of $22,500.

Therefore, option b is valid.

Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of

In this instance, the survey or questionnaire method utilized by the bowling alley manager can effectively gather data from a reasonably substantial sample size and composition.