You have been assigned to examine the financial statements of Mari, Inc. for the year ended December 31, 2023. You discover the following situations in February 2024.

Transaction 4: In 2023, the company sold equipment for $7,200 that had a book value of $4,200 and originally cost $60,000. The company credited the proceeds from the sale to the Equipment account. The company made the following entry:

Cash 7,200

Gain on sale of Equipment 7,200

A. Assume the trial balance has been prepared but the books HAVE NOT been closed for 2023. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations).

Would the answer be

Debit: Accumulated Depreciation 55,800

Debit: Gain on sale of Equipment 4,200

Credit: Equipment 60,000

or

Debit: Accumulated Depreciation 55,800

Credit: Gain on sale of Equipment 3,000

Credit Equipment 52,800