Asset Disposal Assume that Gonzalez Company purchased an asset on January 1, 2015, for $74,600. The asset had an estimated life of six years and an estimated residual value of $7,460. The company used the straight-line method to depreciate the asset. On July 1, 2017, the asset was sold for $48,925. Required: 1. Identify and analyze the effect of the transaction for depreciation for 2017. Activity Operating Accounts Depreciation Expense Increase, Accumulated Depreciation - Asset Increase Statement(s) Balance Sheet and Income Statement Feedback Check My Work Depreciation for 2015 to 2017: the straight-line method of depreciation allocates cost of the asset evenly over time. Set up a T account for accumulated depreciation. Depreciation journal entry: Record depreciation for 6 months updating for sale of asset. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item. Balance Sheet Income Statement Stockholders' Net Assets Liabilities Equity Revenues Income Expenses Depreciation Expense Asset X -5,595 0 -5,595 5,595 -5,595 Feedback Check My Work Partially correct Identify and analyze the effect of the sale of the asset. Activity Accounts Statement(s) minus sign. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item. Balance Sheet Income Statement Stockholders' Net Assets Liabilities Equity Revenues Expenses Income Cash 48,925 48,925 x Asset X 2,300 X 0 2,300 x Feedback Check My Work Partially correct 2. How should the gain or loss on the sale of the asset be presented on the income statement? The gain or loss should appear in the Other Income/Expense category of the income statement to indicate that it is not part of the normal operating activity of the company. Feedback Check My Work Correct Feedback Check My Work Partially correct