In the Special Revenue Fund, which of the following would be included in the journal entry for the sale of equipment originally costing $40,000 with $30,000 accumulated depreciation, sold for $15,000?

• A. A debit to Cash for $15,000.
• B. A debit to Equipment for $15,000.
• C. A credit to Cash for $15,000.
• D. A debit to Other Financing Sources for $15,000.

Answer: (A)

When disposing of a capital asset in a governmental fund like the Special Revenue Fund, the journal entry records only the inflow of current financial resources. The fund uses the modified accrual basis and does not track long-term assets or depreciation, so the asset’s cost, accumulated depreciation, and any gain or loss are not recorded in this fund—their effects appear in the government-wide statements.

Selling equipment for 15,000 therefore increases the fund’s cash, so you debit Cash for 15,000. The other aspects (removing the asset, depreciation, and gain) are handled outside the fund.

So the correct entry reflects the cash receipt: a debit to Cash for 15,000.