In 2014, Blanchard Corporation has plant equipment that originally cost $75,000 and has accumulated depreciation of $30,000. A new processing technique has rendered the equipment obsolete, so it is retired. Which of the following entries should Blanchard use to record the retirement of the equipment?

a. Loss on Disposal of Plant Assets 45,000 Equipment 45,000
b. Plant Equipment 75,000 Accumulated Depreciation – Equipment 30,000 Loss on Disposal of Plant Assets 45,000
c. Accumulated Depreciation – Equipment 30,000 Loss on Disposal of Plant Assets 45,000 Equipment 75,000
d. Loss on Disposal of Plant Assets 45,000 Accumulated Depreciation – Equipment 45,000

The answer is C.

The correct journal entry should be as follows:

Debit Accumulated Depreciation - Equipment with $30,000

Debit Loss on Disposal of Plant Assets with $45,000

Credit Equipment Account with $75,000

To record the retirement of plant assets and the loss on retirement.

Explanation:

When an item of equipment is retired due to obsolescence, the balance on the accumulated depreciation is transferred to the credit of the account.  If the item is sold at scrap value, the scrap value is also credited to the account.  The difference is either a loss on disposal or a gain.

An asset that is retired shows that there is no disposal value.

the first one $24,630

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