On July 15, 2016, Cottonwood Industries sold a patent and equipment to Roquemore Corporation for $750,000 and $325,000, respectively. The book value of the patent and equipment on the date of sale were $120,000 and $400,000 (cost of $550,000 less accumulated depreciation of $150,000), respectively.

Required:

Prepare the journal entries to record the sales of the patent and equipment

Explanation:

The journal entries are as follows

For sale of the patent

Cash Dr $750,000

         To Patent $120,000

         To Gain on sale of patent $630,000

(Being the sale of the patent is recorded)

For sale of the equipment

Cash Dr $325,000

Depreciation Dr $150,000

Loss on sale of an equipment $75,000              

              To Equipment $550,000

(Being the sale of the equipment is recorded)