Crane Company sells office equipment on July 31, 2022, for $21,850 cash. The office equipment originally cost $77,730 and as of January 1, 2022, had accumulated depreciation of $39,740. Depreciation for the first 7 months of 2022 is $4,030. Prepare the journal entries to (a) update depreciation to July 31, 2022, and (b) record the sale of the equipment.

The journal entries are shown below:

a. Depreciation Expense A/c Dr $4,030

To Accumulated Depreciation - Machinery A/c $4,030

(Being depreciation expense is recorded)

b. Cash A/c Dr $21,850

Accumulated Depreciation - Office equipment A/c $43,770

Loss on Disposal of Office equipment A/c $12,110

To Office equipment A/c $77,730

(Being sale of machinery is recorded and the remaining balance is debited to the loss on Disposal of office equipment A/c)

The accumulated depreciation is computed below:

= $39,740 + $4,030

= $43,770