Marks Consulting purchased equipment costing $45,000 on January 1,Year 1.The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 8 years.Straight-line depreciation is used.If the equipment is sold on July 1,Year 5 for $20,000,the journal entry to record the sale will include a:
A)Credit to cash for $20,000.
B)Debit to accumulated depreciation for $22,500.
C)Debit to loss on sale for $10,000.
D)Credit to loss on sale for $10,000.
E)Debit to gain on sale for $2,500.

Question

Quizplus · Accepted Answer

The accumulated depreciation by July 1, Year 5 is $22,500. This is calculated as ($45,000 - $5,000) / 8 years = $5,000 per year. For 4.5 years, it is $5,000 * 4.5 = $22,500.

Marks Consulting Purchased Equipment Costing $45,000 on January 1,Year 1