Carla Vista Co. sells office equipment on July 31, 2017, for $21,240 cash. The office equipment originally cost $86,550 and as of January 1, 2017, had accumulated depreciation of $35,470. Depreciation for the first 7 months of 2017 is $4,710. Prepare the journal entries to (a) update depreciation to July 31, 2017, and (b) record the sale of the equipment.

The journal entries are shown below:

a. Depreciation Expense A/c Dr $4,710

To Accumulated Depreciation - Office equipment A/c $4,710

(Being depreciation expense is recorded)

The depreciation expense is calculated for eight months (January - August)

b. Cash A/c Dr $21,240

Accumulated Depreciation - Office equipment A/c Dr $40,180

Loss on Disposal of Office equipment A/c Dr $25,130

To Office equipment A/c $86,550

(Being sale of machinery is recorded and the remaining balance is debited to the Loss on Disposal of Office equipment A/c)

The accumulated depreciation is computed below:

= $35,470 + $4,710

= $40,180