Abbott Landscaping purchased a tractor at a cost of $27,000 and sold it three years later for $14,400. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $3,500 residual value. Tractors are included in the Equipment account.

1. Record the sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Assume the tractor was sold for $9,400 instead of $14,400. Record the sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Question

contestada

Respuesta :

ijaz4308 ijaz4308 · Answer 1 · 2020-01-17T12:30:03+01:00

Answer:

Please see explanation

Explanation:

The Net book value of the tractor after three years of the purchase is given as follow:

Net book value= Cost - Accumulated depreciation for three years

=27,000-((27,000-3,500)/5*3)

=27,00-14,100

=$12,900

1. The journal entry to be recorded in respect of sales of tractor is given below:

Debit Credit

Bank $14,400

Accumulated depreciation $14,100

((27,000-3,500)/5*3)

Tractor $27,000

Gain on sale of asset $1,500

2. If the asset was sold for $9,400 instead of $14,400, then the following journal entry shall be made:

Debit Credit

Bank $9,400

Accumulated depreciation $14,100

Loss on sale of asset $3,500

Tractor $27,000