Mercury Inc. purchased equipment in 2016 at a cost of $110,000. The equipment wa
ID: 2553499 • Letter: M
Question
Mercury Inc. purchased equipment in 2016 at a cost of $110,000. The equipment was expected to produce 380,000 units over the next five years and have a residual value of $34,000. The equipment was sold for $63,400 part way through 2018. Actual production in each year was: 2016 = 54,000 units? 2017 = 86,000 units? 2018 = 43,000 units. Mercury uses units-of-production depreciation, and all depreciation has been recorded through the disposal date.
Required:
1. Prepare the journal entry to record the sale.
2. Assuming that the equipment was sold for $84,400, prepare the journal entry to record the sale.
Explanation / Answer
Depreciation rate = (110000-34000/380000) = 0.20 per unit
Accumlated depreciation (2016 to 2018) = (54000+86000+43000)*.20 = 36600
1. Prepare the journal entry to record the sale.
Depreciation rate = (110000-34000/380000) = 0.20 per unit
Accumlated depreciation (2016 to 2018) = (54000+86000+43000)*.20 = 36600
2. Prepare the journal entry to record the sale.
Date accounts & explanation debit credit Accumlated depreciation 36600 Cash 63400 Loss on disposal of equipment 10000 Equipment 110000