An asset acquired January 1, 2027, for $14,800 with an estimated 10-year life and no residual value is being depreciated in an equipment group asset account that has an average service life of eight years. The asset is sold for $5,200 on January 1, 2029. Which of the following entries should be used to record the sale?

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We start by restating the scenario and the answer choices to ensure clarity.
Question: An asset acquired January 1, 2027, for $14,800 with an estimated 10-year life and no residual value is being depreciated in an equipment group asset account that has an average service life of eight years. The asset is sold for $5,200 on January 1, 2029. Which of the following entries should be used to record the sale?
Options:
1) Account Title	Debit	Credit
Cash	$ 5,200	 
Accumulated depreciation	$ 3,700	 
Loss on sale of equipment	$ 5,900	 
Equipment	 	$ 14,800
2) Account Title	Debit	Credit
Cash	$ 5,200	 
Loss on sale of equipment	$ 9,600	 
Equipment	 	$ 14,800
3) Account Title	Debit	Credit
Cash	$ 5,200	 
Accumulated depreciation	$ 9,600	 
Equipment	 	$ 14,800
4) Account Title	Debit	Credit
Cash	$ 5,200	 
Equipment	 	$ 5,200

Now, analyze each option carefully.
Option 1: This entry debits Cash for the sale proceeds, debits Accumulated depreciation for $3,700, debits Loss on sale of equipment for $5,900, and credits Equipment for $14,800. The cost of the asset is $14,800, so we must remove the asset's cost from the books (credit Equipment). The accumulated depreciation to remove should reflect depreciation up to the point of sale. Since the asset is in an equipment group with an average service life of eight years, depreciation per year = cost / 8 = 14,800 / 8 = 1,850 per year. From 1/1/2027 to 1/1/2029 is two years, so accumulated depreciation = 2 × 1,850 = 3,700. Therefore, a debit to Accumulated depreciation of $3,700 is appropriate. Book value at sale = 14,800 − 3,700 = 11,100. Cash received = 5,200. Loss on sale = book value − cash received = 11,100 − 5,200 = 5,900. The entries balance: 5,200 (Dr Cash) + 3,700 (Dr Accumulated depreciation) + 5,900 (Dr Loss) = 14,800 (Cr Equipment). Thus, Option 1 is internally consistent with the depreciation method described and the sale calculations.
Option 2: This entry records Cash 5,200 Dr, Loss on sale 9,600 Dr, Equipment 14,800 Cr. But it omits Accumulated depreciation entirely and shows a larger loss than calculated (9,600 instead of 5,900). Since the asset has accumulated depreciation of 3,700, not 0, this option ignores the depreciation that has already been expensed, making it incorrect.
Option 3: This entry shows Cash 5,200 Dr, Accumulated depreciation 9,600 Dr, Equipment 14,800 Cr. The amount 9,600 for accumulated depreciation would imply depreciation of 4,800 per year over two years, which does not align with an eight-year average life (1,850 per year). Therefore, the depreciation balance is inconsistent with the given data, rendering this option incorrect.
Option 4: This entry only records Cash and Equipment for the sale proceeds (Dr Cash 5,200; Cr Equipment 5,200). It ignores the removal of the accumulated depreciation and the loss or gain calculation entirely, which is not compliant with proper asset disposal accounting.
In summary, the critical checks are: (a) remove the asset cost (credit Equipment) and (b) remove the accumulated depreciation up to the sale date (debit Accumulated depreciation) along with recognizing any gain or loss on sale. The numbers must reflect the 8-year average life depreciation of 1,850 per year for two years, totaling 3,700 accumulated depreciation, and the resulting loss of 5,900 based on book value of 11,100 minus cash received 5,200. Options that fail to remove accumulated depreciation or to correctly compute the loss do so for the stated reasons.

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