Equipment with an estimated residual value at acquisition of $15,000 was sold on December 31, 2013, for $20,000 cash. The following data were available at the time of sale: When this transaction is recorded, it should include a
A)debit of $80,000 to the Loss on Disposal account.
B)credit of $20,000 to the Equipment account.
C)credit of $5,000 to the Gain on Disposal account.
D)debit of $20,000 to the Accumulated Depreciation account.

Question

Equipment with an estimated residual value at acquisition of $15,000 was sold on December 31, 2013, for $20,000 cash. The following data were available at the time of sale:  When this transaction is recorded, it should include a
A)debit of $80,000 to the Loss on Disposal account. 
B)credit of $20,000 to the Equipment account. 
C)credit of $5,000 to the Gain on Disposal account. 
D)debit of $20,000 to the Accumulated Depreciation account.

Quizplus · Accepted Answer

The sale of equipment resulted in a gain since the amount received ($20,000) exceeds the estimated residual value ($15,000). Therefore, the Gain on Disposal account is credited for the difference, which in this case is $5,000. None of the other accounts listed are affected by this transaction.

Equipment with an Estimated Residual Value at Acquisition of $15,000