Allyn Company purchased equipment costing 55,000 on January 1, Year 1. The equipment is estimated to have a salvage value of 5,000 and an estimated useful life of 5 years Straight-line depreciation is used, and all depreciation has been recorded as of December 31, Year 4. If the equipment is sold on December 31, Year 4 for 20,000 the journal entry to record the sale is: Debit Cash, 20,000 : Debit Loss on Sale, 35,000 Credit Equipment, 55,000 Debit Cash, 20,000 Debit Accumulated Depreciation, 35,000 Credit Equipment, 55,000 Debit Cash, 20,000 Credit Equipment, 15,000 Credit Gain on Sale, 5,000 Debit Cash, 20,000 Debit Depreciation Expense, 40,000 Credit Equipment, 55,000 Credit Gain on Sale, 5,000 Debit Cash, 20,000 Debit Accumulated Depreciation, 40,000 Credit Equipment, 55,000 Credit Gain on Sale, 5,000.

To determine the correct journal entry for the sale of the equipment, we need to calculate the accumulated depreciation and the book value of the equipment at the time of sale.1. **Calculate Annual Depreciation:** 2. **Calculate Accumulated Depreciation as of December 31, Year 4:** Since the equipment has been depreciated for 4 years: 3. **Calculate Book Value at the Time of Sale:** 4. **Determine Gain or Loss on Sale:** The equipment is sold for 5. **Prepare the Journal Entry:** - Debit Cash for the amount received: - Debit Accumulated Depreciation to remove it from the books: - Credit Gain on Sale for the gain realized: - Debit Accumulated Depreciation, - Credit Gain on Sale, 20,000; Debit Accumulated Depreciation, \ 55,000; Credit Gain on Sale, \$5,000.**