Asset Disposal
Assume that Gonzalez Company purchased an asset on January 1, 2014, for $53,200. The asset had an estimated life of six years and an estimated residual value of $5,320. The company used the straight-line method to depreciate the asset. On July 1, 2016, the asset was sold for $35,610.
Required:
1. Make the journal entry to record depreciation for 2016. How does this entry affect the accounting equation?
Indicate the effect on financial statement items by selecting "–" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
Journal Balance Sheet Income Statement
Stockholders’ Net
Date Description Debit Credit Assets = Liabilities + Equity Revenues – Expenses = Income
July 1
Record the sale of the asset. How does this entry affect the accounting equation?
Indicate the effect on financial statement items by selecting "–" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
Journal Balance Sheet Income Statement
Stockholders’ Net
Date Description Debit Credit Assets = Liabilities + Equity Revenues – Expenses = Income
July 1
2. How should the gain or loss on the sale of the asset be presented on the income statement?
The gain or loss should appear in the of the income statement to indicate that it part of the normal operating activity of the company.