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22E

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Horngren'S Financial And Managerial Accounting
Found in: Page 488

Short Answer

Recording partial-year depreciation and sale of an asset On January 2, 2017, Comfy Clothing Consignments purchased showroom fixtures for $17,000 cash, expecting the fixtures to remain in service for five years. Comfy has depreciated the fixtures on a double-declining-balance basis, with zero residual value. On October 31, 2018, Comfy sold the fixtures for $7,600 cash. Record both depreciation expense for 2018 and sale of the fixtures on October 31, 2018.

A business entity will generate a gain of $800 on the furniture sale.

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Step by Step Solution

Definition of Depreciation

A company charged the expenses to report the decline in the value of the fixed assets acquired by the company is known as depreciation expenses.

Recording journal entries

Date

Accounts and Explanation

Debit $

Credit $

31 Oct 2018

Depreciation expenses

$3,400

Accumulated depreciation

$3,400

31 Oct 2018

Cash

$7,600

Accumulated depreciation

$10,200

Gain on sale

$800

Furniture and fixture

$17,000

Recording journal entries

Working note:

Year

Depreciation base

X

Depreciation rate

=

Depreciation expenses

2017

$17,000

X

40%

=

$6,800

2018

$10,200

X

40%

=

$3,400

Total

=

$10,200

Note: Depreciation for year 2018 is calculated for 10 months. Therefore, it is multiplied by (10/12)

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