Prepare the journal entries to record the following transactions for Blossom Company, which has a calendar year end and uses the straight-line method of depreciation. On September 30, 2022, the company sold old equipment for $124,200. The equipment was purchased on January 1, 2020, for $259,200 and was estimated to have a $43,200 salvage value at the end of its 5-year life. Depreciation on the equipment has been recorded through December 31, 2021.

Depreciation is the recording of asset expense due to its use. It is due to use of fair value of the asset after use. The expense value reduces the asset value over useful life period.

As per given data

Cost of Asset = $259,200

Useful life= 5 years

Salvage Value = $43,200

Asset is purchased on January 1, 2020 and on September 30, 2022 depreciation of only 2 years and 9 months has charged.

Depreciation per year = (Cost of Asset - Salvage Value) / Useful life = ($259,200 - $43,200) / 5 = $43,200

Accumulated Depreciation as on September 30, 2022 = ($43,200 x 2) + $43,200 x 9/12 = $118,800

Book value of the asset is the net of accumulated depreciation of the asset. The accumulated depreciation on September 30, 2022, is as follow:

Net Book value of Asset = 259,200 - $118,800 = $140,400