{"id":180466,"date":"2025-01-06T14:03:46","date_gmt":"2025-01-06T14:03:46","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=180466"},"modified":"2025-01-06T14:03:48","modified_gmt":"2025-01-06T14:03:48","slug":"a-company-bought-a-computer-for-1500","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/01\/06\/a-company-bought-a-computer-for-1500\/","title":{"rendered":"A company bought a computer for $1,500"},"content":{"rendered":"\n

A company bought a computer for $1,500. Three years later, the computer was sold for $300. Assuming a 5-year estimated service life and straight line depreciation, which account(s) would be used to record the disposal of the asset?<\/p>\n\n\n\n

The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n

To record the disposal of the computer, the following accounts would be used:<\/p>\n\n\n\n

    \n
  1. Accumulated Depreciation<\/strong><\/li>\n\n\n\n
  2. Computer (Asset)<\/strong><\/li>\n\n\n\n
  3. Loss on Disposal of Asset<\/strong> (if applicable)<\/li>\n<\/ol>\n\n\n\n

    Explanation:<\/h3>\n\n\n\n

    When a company purchases an asset, such as a computer, it is depreciated over time. The straight-line method of depreciation assumes that the asset loses an equal amount of value each year. In this case, the computer was bought for $1,500 with an estimated service life of 5 years. The straight-line depreciation would be calculated as follows:<\/p>\n\n\n\n

    [
    \\text{Annual Depreciation} = \\frac{\\text{Cost of Asset} – \\text{Salvage Value}}{\\text{Useful Life}} = \\frac{1500 – 0}{5} = 300 \\text{ per year}
    ]<\/p>\n\n\n\n

    Thus, the computer depreciates by $300 each year. After 3 years, the total accumulated depreciation would be:<\/p>\n\n\n\n

    [
    \\text{Accumulated Depreciation} = 300 \\times 3 = 900
    ]<\/p>\n\n\n\n

    At the end of 3 years, the book value of the computer is:<\/p>\n\n\n\n

    [
    \\text{Book Value} = \\text{Cost} – \\text{Accumulated Depreciation} = 1500 – 900 = 600
    ]<\/p>\n\n\n\n

    The computer is then sold for $300, which is less than its book value. The loss on disposal would be:<\/p>\n\n\n\n

    [
    \\text{Loss on Disposal} = \\text{Book Value} – \\text{Sale Price} = 600 – 300 = 300
    ]<\/p>\n\n\n\n

    The accounting entries required to record the disposal would be as follows:<\/p>\n\n\n\n

      \n
    1. Accumulated Depreciation (Debit)<\/strong>: This account is debited to remove the accumulated depreciation on the asset. In this case, it would be $900.<\/li>\n\n\n\n
    2. Computer (Asset) (Credit)<\/strong>: The asset account is credited to remove the computer from the books, valued at its original purchase price of $1,500.<\/li>\n\n\n\n
    3. Cash (Debit)<\/strong>: Cash or the equivalent account is debited for the $300 received from the sale of the computer.<\/li>\n\n\n\n
    4. Loss on Disposal of Asset (Debit)<\/strong>: Since the computer was sold for less than its book value, the company records a loss of $300 in this account.<\/li>\n<\/ol>\n\n\n\n

      By making these journal entries, the company effectively removes the computer and its related depreciation from the books, while accounting for the loss incurred from the sale.<\/p>\n","protected":false},"excerpt":{"rendered":"

      A company bought a computer for $1,500. Three years later, the computer was sold for $300. Assuming a 5-year estimated service life and straight line depreciation, which account(s) would be used to record the disposal of the asset? The Correct Answer and Explanation is : To record the disposal of the computer, the following accounts […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-180466","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/180466","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=180466"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/180466\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=180466"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=180466"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=180466"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}