
March31, 2025, Lush Landscapes discarded equipment that had a cost of $20,000. Accumulated Depreciation as of December 31, 2024, was $18,000. Assume annual depreciation on the equipment is $2,000.
Calculate any gain or loss on the disposal of the equipment. (Complete all input fields. Enter a 0 for items with a zero value. Enter a loss with a minus sign or parentheses.)              Fair value of assets received
 Less: Book value of asset disposed of
 Cost
 Less: Accumulated Depreciation
 Gain or (Loss)
Journalize the disposal of the equipment.

To calculate the gain or loss on the disposal of equipment, let's go through each step.

### Step 1: Calculate Accumulated Depreciation as of March 31, 2025
1. **Accumulated Depreciation as of December 31, 2024:** $18,000
2. **Annual Depreciation:** $2,000 per year. 

Since three months have passed in 2025, we calculate a partial depreciation for this period:
\[
\text{Depreciation for 3 months} = \frac{\text{Annual Depreciation}}{12} \times 3 = \frac{2000}{12} \times 3 = 500
\]

3. **Total Accumulated Depreciation as of March 31, 2025:**
   \[
   18,000 + 500 = 18,500
   \]

### Step 2: Calculate Book Value of the Equipment on March 31, 2025
1. **Original Cost:** $20,000
2. **Less: Accumulated Depreciation as of March 31, 2025:** $18,500

\[
\text{Book Value} = 20,000 - 18,500 = 1,500
\]

### Step 3: Calculate Gain or Loss on Disposal
Since the equipment is discarded and no assets were received (fair value of assets received = $0):
\[
\text{Gain or (Loss)} = \text{Fair Value of Assets Received} - \text{Book Value} = 0 - 1,500 = -1,500
\]

The disposal results in a **loss of $1,500**.

### Journal Entry for Disposal
To record the disposal in the journal, the entry will remove the cost and accumulated depreciation from the accounts and recognize the loss:

| Date         | Account                    | Debit   | Credit  |
|--------------|----------------------------|---------|---------|
| March 31, 2025 | Accumulated Depreciation      | 18,500  |         |
| March 31, 2025 | Loss on Disposal              | 1,500   |         |
| March 31, 2025 | Equipment                     |         | 20,000  |

**Explanation**:
- Debit **Accumulated Depreciation** to remove it from the books.
- Debit **Loss on Disposal** to recognize the loss incurred.
- Credit **Equipment** to remove the equipment's original cost.

Would you like further explanation on any part of this calculation? Here are related questions that could provide deeper insights:

1. How is partial-year depreciation typically calculated for various methods?
2. What impacts could different depreciation methods (e.g., straight-line vs. double declining) have on disposal gains or losses?
3. How would the journal entry change if the disposal was instead a sale with proceeds?
4. Why is it important to account for asset disposals even if no cash is received?
5. How does a gain or loss on disposal

March 31, 2025, Lush Landscapes discarded equipment that had a cost of $20,000. Accumulated Depreciation as of December 31, 2024, was $18,000. Assume annual depreciation on the equipment is $2,000. Calculate any gain or loss on the disposal of the equipment. (Complete all input fields. Enter a 0 for items with a zero value. Enter a loss with a minus sign or parentheses.) Fair value of assets received Less: Book value of asset disposed of Cost Less: Accumulated Depreciation Gain or (Loss) Journalize the disposal of the equipment.

Learn how to calculate the gain or loss on disposal of equipment with this accounting example. The problem involves calculating accumulated depreciation, determining the book value, and preparing a journal entry for disposal. Suitable for college-level introductory accounting students.

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