Equipment was acquired on January 1, 2021, for $30,000 with an estimated four-year life and $3,000 residual value. The company uses straight-line depreciation. Record the gain or loss if the equipment was sold on December 31, 2023, for $10,300.

Given that,

Acquired value of equipment on January 1, 2021 = $30,000

Useful life = 4 years

Residual value = $3,000

Equipment was sold on December 31, 2023 = $10,300

Company uses straight-line depreciation,

Annual Straight line depreciation:

= (Value of equipment - Residual value) ÷ useful life

= ($30,000 - $3,000) ÷ 4 year

= $6,750

Total accumulated depreciation from 1 Jan 2021 to 31 Dec 2023:

= No. of years × Annual Straight line depreciation

= 3 years × $6,750

= $20,250

Book value at time of sale:

=  Value of equipment - Total accumulated depreciation

= $30,000 - $20,250

= $9,750

Therefore, the selling value of equipment is larger than the book value. Hence, there is a gain on sale as follows:

= Selling value - Book value

= $10,300 - $9,750

= $550

The journal entry is as follows:

On December 31, 2023

Cash A/c Dr. $10,300

Accumulated Depreciation - equipment A/c Dr. $20,250

             To Gain on sale      $550

             To equipment        $30,000

(To record the gain on sale)

fractionally backed paper money

fiat money

paper money

metallic money

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