Question

On October 31, 2018, Alternative Landscapes discarded equipment that had a cost of \(26,920. Accumulated Depreciation as of December 31, 2017, was \)25,000. Assume annual depreciation on the equipment is $1,920. Journalize the partial-year depreciation expense and disposal of the equipment.

Short answer

The loss on disposal of equipment is $320 and the required journal entries are passed.

Step-by-step solution

Computation of Gain or loss

$\begin{array}{c}\mathrm{Partial}\mathrm{Year}\mathrm{Depreciation}=\mathrm{Annual}\mathrm{Depreciation}\times \mathrm{Time}\mathrm{Period}\\ \mathbf{=}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{920}\mathbf{\times }\frac{10}{12}\\ =\$1,600\end{array}$

$\begin{array}{c}\mathrm{Gain}\mathrm{or}\left(\mathrm{loss}\right)=\mathrm{Market}\mathrm{Value}\mathrm{of}\mathrm{asset}\mathrm{received}-\mathrm{Less}\mathrm{book}\mathrm{value}-\mathrm{Accumulated}\mathrm{Depreciation}\\ \mathbf{=}\mathbf{0}\mathbf{-}\mathbf{(}\$\mathbf{26}\mathbf{,}\mathbf{920}\mathbf{-}\$\mathbf{26}\mathbf{,}\mathbf{600}\mathbf{)}\\ =\left(\$320\right)\end{array}$

Journal entry to record partial year depreciation and disposal of the equipment

Journal Entry
Date	Accounts and Explanation	Debit ($)	Credit ($)
Oct 31	Depreciation Expense- Equipment	1,600
	Accumulated Depreciation- Equipment		1,600
	(To record depreciation on equipment)
Oct 31	Accumulated Depreciation- Equipment	26,600
	Loss on disposal of Equipment	320
	Equipment		26,920
	(Discarded the equipment)