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26 April, 17:39

Abbott Landscaping purchased a tractor at a cost of $45,000 and sold it three years later for $21,000. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $3,000 residual value. Tractors are included in the Equipment account.

Required:

1. Record the sale.

2. Assume the tractor was sold for $16,600 instead of $21,000.

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  1. 26 April, 17:45
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    1. Dr Cash 21,000

    Dr Accumulated depreciation - equipment 25,200

    Cr Equipment 45,000

    Cr Gain on sale of equipment 1,200

    2. Dr Cash 16,600

    Dr Accumulated depreciation - equipment 25,200

    Dr Loss on sale of equipment 3,000

    Cr Equipment 44,800

    Explanation:

    1. Preparation of Abbott Landscaping Record of sales

    Since Abbott Landscaping tractor cost $45,000 and later sold for $21,000 after three years in which he recorded depreciation using the straight-line method with a five-year service life, and a $3,000 residual this mean the record of the sales will be:

    Dr Cash 21,000

    Dr Accumulated depreciation - equipment 25,200

    Cr Equipment 45,000

    Cr Gain on sale of equipment 1,200

    2. Preparation to record the entry assume the tractor was sold for $16,600 instead of $21,000

    Since we are Assuming that the tractor was sold for $16,600 instead of $21,000 this means the transaction will be recorded as:

    Dr Cash 16,600

    Dr Accumulated depreciation - equipment 25,200

    Dr Loss on sale of equipment 3,000

    Cr Equipment 44,800

    Calculation for Accumulated depreciation = [ ($45,000 - $3,000) / 5] x 3

    =25,200
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