EXERCISE 1

(a)Brown Company purchased equipment in 2008 for $150,000 and estimated a $10,000 salvage value at the end of the equipment's 10-year useful life. At December 31, 2014, there was $98,000 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation. On March 31, 2015, the equipment was sold for $40,000.

Indicate the accounts that are increased and/or decreased to remove the equipment from the books of Brown Company on March 31, 2015.

(b)Finney Company sold a machine for $15,000. The machine originally cost $35,000 in 2012 and $8,000 was spent on a major overhaul in 2015 (charged to the Equipment account). Accumulated Depreciation on the machine to the date of disposal was $28,000.

Indicate which accounts are increased and /or decreased to record the disposition of the machine.