Assume that Gonzalez Company purchased an asset on January 1, 2015, for $70,000. The asset had an estimated life of six years and an estimated residual value of $7,000. The company used the straight-line method to depreciate the asset. On July 1, 2017, the asset was sold for $46,560.

Required:

1. Identify and analyze the effect of the transaction for depreciation for 2017.

Activity
Accounts
Statement(s)

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

Expenses

=

Income

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Identify and analyze the effect of the sale of the asset.

Activity
Accounts
Statement(s)

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

Expenses

=

Income

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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 of the income statement to indicate that it part of the normal operating activity of the