Counselors of Mableton purchased equipment on January 1, 2017, for $37,000. Counselors of Mableton expected the equipment to last for five years and have a residual value of $4,500. Suppose counselors of Mableton sold the equipment for $25,200 on December 31, 2018, after using the equipment for two full years. Assume depreciation 2018 has been recorded. Journalize the sale of equipment, assuming straight-line depreciation was used

Dr cash $25,200

Dr accumulated depreciation $13,000

Cr equipment $37,000

Cr profit on disposal $1,2000

Explanation:

The yearly depreciation expense on the equipment is computed thus:

depreciation=(cost-residual value)/useful life

cost=$37000

residual value=$4,500

useful life= 5 years

depreciation=($37000-$4500)/5

depreciation=$6,500

accumulated depreciation for 2 years=$6,500*2=$13,000

Cash proceeds from disposal=$25,200

Upon disposal, we would debit cash with $25,200 as well as accumulated depreciation with $13,000 while the equipment account is credited with the original cost of $37,000

Total debits=$25,200+$13,000=$38,200

total credit=$37,000

profit on disposal=$38,200-$37000=$1,200

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answer; break-even analysis;