Sold Equipment for Cash Journal Entry

Sold equipment for cash is the transaction that company sells its equipment and receives cash immediately from the buyer.

Equipment is the term used to refer to the fixed assets that report on the company balance sheet. This includes items such as machinery, vehicles, and others. The cost of equipment is typically spread out over its useful life through depreciation. Equipment can be an important part of a company’s operations, and it is important to carefully consider the costs and benefits of equipment purchases.

In some cases, it may be more efficient to lease equipment rather than buy it outright. When selecting equipment, businesses should consider factors such as maintenance costs, repair costs, and replacement costs. With careful planning, businesses can ensure that they are getting the most out of their equipment investments.

The company purchases equipment for the purpose of internal use. This may be done in order to increase production or efficiency or to improve the quality of the product. Whatever the reason, it is important to realize that this is a major decision as it requires the investment of capital. The equipment must be carefully chosen in order to suit the specific needs of the company. Additionally, it must be properly installed and maintained in order to function properly. Making a wise choice when purchasing equipment can be the key to success for any business.

The fixed assets of a company are those long-term tangible assets that are not for resale and will be used in the operations of the business for more than one year. These assets are often expensive and require a significant amount of time to bring to the operation. Therefore, they are not considered as part of the current assets of the business, which are those that will be converted to cash within one year or less.

At some point, the company may decide to sell the equipment due to various reasons. The company sold the equipment for cash. The company removes the fixed assets from the balance sheet which can help to free up capital that can be used for other purposes, such as investing in new equipment or expanding the business. The company received cash from the sale of the equipment. The cash was used to purchase new equipment. The new equipment will be used in the company’s manufacturing process. The company is pleased with the transaction and believes that it was in the best interest of the shareholders.

Once a company has sold its fixed assets, it needs to remove them from its balance sheet. This is because the balance sheet is a snapshot of the company’s financial health at a specific point in time, and no longer including the fixed assets would overstate the company’s assets.

Journal Entry for Equipment Sold for Cash

When company disposes of fixed assets, they have to remove both cost and accumulated depreciation of that assets. The fixed assets are no longer under the company’s control.

The sale of equipment will generate gain or loss on the disposal. The gain on disposal happens when the company is able to sell the equipment for more than the net book value.

The loss of equipment disposal happens when the company sold equipment for less than the net book value.

Gain from sale of equipment

The journal entry is debiting cash, accumulated depreciation and credit cost of equipment, gain from sale of fixed assets.

Account	Debit	Credit
Cash	000
Accumulated Depreciation of Equipment	000
Gain from sale of fixed assets		000
Cost of Equipment		000

Loss from Sale of Equipment

The journal entry is debiting loss from sale of equipment, accumulated depreciation, and credit cost of equipment.

Account	Debit	Credit
Cash	000
Loss from sale of fixed assets	000
Accumulated Depreciation of Equipment	000
Cost of Equipment		000

Example

ABC is a construction company. During the month, the company decides to sell some equipment for $ 30,000. The equipment’s cost is $ 100,000 and accumulated depreciation of $ 80,000. The buyer paid cash payment immediately after receiving the equipment.

Please prepare a journal entry for cash received from sold equipment.

Before making a journal entry, we need to calculate the gain or loss from equipment disposal.

The equipment net book value is $ 20,000 which arrive from cost less accumulated depreciation ($ 100,000 – $ 80,000). They are sold for $ 30,000, so it is gain of $ 10,000 ($ 30,000 – $ 20,000).

The company has to remove the cost $ 100,000 and accumulated depreciation $ 80,000 from the balance sheet.

The journal entry is debiting cash $ 30,000, accumulated depreciation $ 80,000 and credit cost of fixed assets $ 100,000, Gain on disposal $ 10,000.

Account	Debit	Credit
Cash	30,000
Accumulated Depreciation of Equipment	80,000
Gain from sale of fixed assets		10,000
Cost of Equipment		100,000