Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

23 E

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

Short Answer

Recording partial-year depreciation and sale of an asset On January 2, 2016, Pet Spa purchased fixtures for $37,800 cash, expecting the fixtures to remain in service for six years. Pet Spa has depreciated the fixtures on a straight-line basis, with $9,000 residual value. On May 31, 2018, Pet Spa sold the fixtures for $24,200 cash. Record both depreciation expense for 2018 and sale of the fixtures on May 31, 2018

Loss on sale of Equipment value is $2,000.

See the step by step solution

Step by Step Solution

Definition of Straight-Line Method

The method of calculating the depreciation under which each year of the useful life of the asset reports the same depreciation is known as the straight-line method. The depreciation method under this method is calculated using salvage value, cost, and useful life.

Calculate the Depreciation by using Straight – Line method

Date

Accounts and Explanation

Debit $

Credit $

31 May 2018

Depreciation expenses

2,000

Accumulated depreciation

2,000

31 May 2018

Cash

24,200

Accumulated depreciation

11,600

Loss on sale

2,000

Furniture and Fixture

37,800

(To record the sale of asset)

Working note:

Calculation of annual depreciation

Depreciation from 1 Jan 2018 to 31 May 2018:

Particulars

Amount

Amount

Cash received against sale

$ 24,200

Less: Book value of asset disposed of cost

$ 37,800

Less : Accumulated Depreciation

($ 11,600)

(26,200)

Loss

$2,000

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.