Accounting Discussion Questions
How is the disposition of a long-term asset like land or equipment or a building recorded in the General Journal?
Disposition of a long-term asset may result to a gain or a loss. In case of a loss on the sale of equipment of building, the following shows the recording of the transactions.
Loss on disposition xxx
Accumulated depreciation xxx
Equipment/machine (cost) xxx
What is the function of these entries (meanings, what do the accounts that are affected by the entries communicate to readers of the financial statements)?
The above entries show the accounts that are affected when a long term asset is affected. Incase of a gain on ale of a long term asset, corresponding entry is made on credit entry. The cost of the recorded fixed asset is reversed along with the corresponding accumulated depreciation. The remaining difference between the cost of the equipment and the accumulated depreciation is treated as a gain or a loss.
Prepare journal entries to record the following:
1. Gomez Company retires its delivery equipment, which cost $41,000. Accumulated depreciation is also $41,000 on this delivery equipment. No salvage value is received.
Accumulated depreciation $41000………..