Questions: Prepare the journal entry to record the sale of the equipment: Cash 60,000 Accumulated Depreciation 55,000 Loss on sale of Equipment) 10,000 Equipment (Boal) 125,000 Show your calculation to support your gain or loss: Book value = cost - depreciation = 125,000 - 55,000 = 70,000 60,000 from 70,000 = 10,000 loss on sale Explain what is happening in this entry (i.e., By debiting account I am increasing that account and by crediting account I am decreasing that account):

To prepare the journal entry for the sale of the equipment, we need to record the cash received, remove the equipment and its accumulated depreciation from the books, and recognize any gain or loss on the sale.

1. Debit Cash: $60,000

   • This entry increases the cash account, reflecting the cash received from the sale of the equipment.

2. Debit Accumulated Depreciation: $55,000

   • This entry removes the accumulated depreciation associated with the equipment from the books. Accumulated depreciation is a contra-asset account, and debiting it decreases its balance.

3. Debit Loss on Sale of Equipment: $10,000

   • This entry records the loss incurred from the sale. A loss is recorded when the sale proceeds are less than the book value of the asset.

4. Credit Equipment: $125,000

   • This entry removes the equipment from the books. By crediting the equipment account, we decrease its balance, reflecting that the asset is no longer owned by the company.

• Book Value of Equipment: \[ \text{Book Value} = \text{Cost} - \text{Accumulated Depreciation} = \$125,000 - \$55,000 = \$70,000 \]

• Loss on Sale: \[ \text{Loss} = \text{Book Value} - \text{Cash Received} = \$70,000 - \$60,000 = \$10,000 \]

• Cash: By debiting the cash account, we are increasing the cash balance, reflecting the inflow of cash from the sale.
• Accumulated Depreciation: By debiting accumulated depreciation, we are decreasing this contra-asset account, effectively removing the depreciation that had been recorded against the equipment.
• Loss on Sale of Equipment: By debiting the loss account, we are recognizing the financial loss incurred from selling the equipment for less than its book value.
• Equipment: By crediting the equipment account, we are decreasing the asset account, indicating that the equipment has been sold and is no longer part of the company's assets.