Mercury Inc. purchased equipment in 2016 at a cost of $313,000. The equipment wa

Question

Mercury Inc. purchased equipment in 2016 at a cost of $313,000. The equipment was expected to produce 310,000 units over the next five years and have a residual value of $34,000. The equipment was sold for $167,900 part way through 2018. Actual production in each year was: 201644,000 units; 2017-70,000 units: 2018 = 35,000 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 $181.900, prepare the journal entry to record the sale

Explanation / Answer

Depreciation per unit = (313000-34000)/310000= 0.9 Accumulated depreciation till the date of sale = (44000*0.9)+(70000*0.9)+(35000*0.9)= 134100 1 Cash 167900 Accumulated depreciation 134100 Loss on sale 11000          Equipment 313000 2 Cash 181900 Accumulated depreciation 134100          Gain on sale 3000          Equipment 313000

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