Problem 7 (20 Points)

(a)Brown Company purchased equipment in 2008 for $160,000 and estimated a $10,000 salvage value at the end of the equipment's 10-year useful life. At December 31, 2014, there was $105,000 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation. On March 31, 2015, the equipment was sold for $42,000.

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