The Outpatient Clinic of Eastside Hospital acquired X-ray equipment for $29,000 with an expected useful life of 5 years and a $4,000 expected residual value. The hospital uses straight-line depreciation. The clinic sold the equipment at the end of the fourth year for $14,000 cash.
1. Compute the gain or loss on the sale. Show the effects of the sale on the balance sheet equation, identifying all specific accounts by name. Where and how would the sale appear on the income statement?
2. (a) Show the journal entry for the transaction in requirement 1.
(b) Repeat 2a, assuming that the cash sales price was $8,500 instead of $14,000.