Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

The journal entry to retire old equipment that is not fully depreciated includes a:

Credit to Equipment and a credit to Gain on Disposal

Debit to Equipment and a credit to Accumulated Depreciation

Debit to Accumulated Depreciation and a debit to Loss on Disposal

Credit to Cash and a debit to Equipment

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Verified step by step guidance

Understand the scenario: Retiring old equipment that is not fully depreciated means the equipment is being removed from the books before its full value has been allocated as depreciation expense. This requires adjusting the accounts to reflect the disposal and any associated loss or gain.

Step 1: Identify the accounts involved. The accounts typically include Equipment (asset account), Accumulated Depreciation (contra-asset account), Cash (if any proceeds are received), and Loss on Disposal (expense account).

Step 2: Determine the book value of the equipment. The book value is calculated as the original cost of the equipment minus the accumulated depreciation. This helps assess whether there is a loss or gain on disposal.

Step 3: Record the journal entry. Debit Accumulated Depreciation to remove the depreciation associated with the equipment. Debit Loss on Disposal if the equipment is retired at a loss (i.e., no proceeds or proceeds less than the book value). Credit Equipment to remove the asset from the books. If cash is received, credit Cash for the amount received.

Step 4: Verify the journal entry balances. Ensure that the total debits equal the total credits in the journal entry to maintain the accounting equation (Assets = Liabilities + Equity).