Reconstruct Haliburton Paddle Works Ltd.’s disposal entry from the note and the income statement: equipment that cost 40,000 with accumulated amortization of 12,000 was sold for 26,000 cash; the income statement shows a loss on disposal of 2,000.
Reconstruct Haliburton Paddle Works Ltd.’s disposal entry from the note and the income statement: equipment that cost 40,000 with accumulated amortization of 12,000 was sold for 26,000 cash; the income statement shows a loss on disposal of 2,000.
Answer
Dr Cash 26000; Dr Accumulated Amortization – Equipment 12000; Dr Loss on Disposal 2000; Cr Equipment 40000
Accounts - Cash - Accumulated Amortization – Equipment - Loss on Disposal - Equipment - Gain on Disposal - Amortization Expense **Cash** (debit) 26,000 is the proceeds — the only cash line and the investing inflow. **Accumulated Amortization – Equipment** (debit) 12,000 removes the contra balance on the asset sold; **Equipment** (credit) 40,000 removes the asset at **cost**. The 2,000 gap is a **Loss on Disposal** (debit). The trap is crediting Equipment for the 28,000 carrying amount — that leaves 12,000 of cost and 12,000 of contra on the books for an asset that is gone.
Lyryx Intermediate FA Vol 1 §4.3 (additional-information case); Hermanson Vol 1 ch 16 (sale at a loss); Dauderis & Annand §11.2 (concept map N8)