how can i make this accounting entry?

Question

sold store equipment for $9000. the equipment originally cost $10000 and had a book value of $7000. i know that the loss is $1000 but the book value thing is confusing me. can u explan how to enter anything with the book value? thanks.

Answer 1

Original cost of equipment $10,000 (Dr), net book value (nbv) $7,000, so accumulated depreciation must be $3,000 (Cr). When you sell an asset, to calculate gain or loss, you compare the sales proceeds with the nbv. So comparing proceeds of $9k with nbv of $7k, so you made a gain of $2k. Whenever you sell an asset, you have to close off the part of all accounts which relate to that asset. So your entries are:

Dr Cash (or a/cs receivable) $9,000
Dr Accd depn $3,000 (to close off the part relating to that asset)
Cr Asset at cost $10,000 (to close off related part)
Cr Gain on disposal of asset $2,000 (income a/c)

Answer 2

The original journal entry when the store bought the equipment (i.e. before this problem started) was:
Db Equipment 10000
Cr Cash 10000
Then over the course of time, the business owning the equipment used it to help it earn revenue before they sold it, and it depreciated by 3000. The entry for that would be:
Db Depreciation expense 3000
Cr Accumulated depreciation 3000
The "book value" is the 10K purchase price less the 3k in accumulated depreciation OR 7k.

Now your data starts. The store sells the equipment for cash of 9000, eliminates the accumulated depreciation, eliminates the equipment recognizes a gain or loss (in this case a gain (NOT the loss you thought--see below))
Dr. Cash 9000
Dr accumulaed depreciation 3000
Cr Equipment 10000
Cr Gain 2000

You incorrectly thought that they had a loss bc what they got was less than what they paid, but you have to realize that they got "3K" worth of cost out of it during the time that it owned the equipment. Thus, they got 9K for something that was only only worth 7K on the books (book value) for a gain of 2K. Hope this was helpful. My final suggestion is to always work it out with debits and credits bc the entries have to balance and it helps you figure out the gain or the loss.