Disposal of Equipment (Alternate is 8-72.) acquired a new Boeing 727-100 airplane for $26 million. Its expected residual value was $6 million. The company's annual report indicated that straight-line depreciation was used based on an estimated service life of 20 years. Assume the company records gains or losses, if any, in Other Income (Expense). Show all amounts in millions of dollars. 1. Assume that Alaska sold the equipment at the end of the sixth year for $22 million cash. Compute the gain or loss on the sale. Show the effects of the sale on the balance sheet equation, identifying all specific accounts by name. Where and how would the sale appear on the income statement? 2.

(a) Show the journal entries for the transaction in requirement 1.

(b) Repeat 2a, assuming that the cash sales price was $19 million instead of $22 million.