Abbott Landscaping purchased a tractor at a cost of $39,000 and sold it three years later for $19,800. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $2,500 residual value. Tractors are included in the Equipment account. 2. Assume the tractor was sold for $12,400 instead of $19,800. Record the sale.

The journal entry is as follows:

Cash A/c Dr. $12,400

Accumulated Depreciation - Equipment A/c Dr. $21,900

Loss on sale of equipment A/c Dr. $4,700

            To Equipment                                                          $39,000

(To record the sale)

Working notes:

Accumulated Depreciation - Equipment:

= [(Cost of tractor - Residual value) ÷ Service life] × No. of years

=  [(39,000 - 2,500) ÷ 5] × 3

= $21,900