9/9 - Instagram Post Solution

This is a pretty hard one if you're a newcomer to accounting...

The book value of equipment is equal to historical cost minus accumulated depreciation.

The historical cost in this case is $10M, so we know that the company must have recognized $4M of depreciation in order for the equipment to have a book value of $6M (they are depreciating the equipment over 5 years with no salvage value).

When you sell the equipment, you're going to credit the acquisition cost for $10M and debit accumulated depreciation for $4M. That is the proper way to "retire" the asset from your books. The rest of the journal entry will depend on what you're getting in exchange for the equipment.

 


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