n JanuaryJanuary 2, 20172017, ThriftyThrifty Clothing Consignments purchased sho

Question

n

JanuaryJanuary

2,

20172017,

ThriftyThrifty

Clothing Consignments purchased showroom fixtures for

$ 14 comma 000$14,000

cash, expecting the fixtures to remain in service for five years.

ThriftyThrifty

has depreciated the fixtures on adouble-declining-balance basis, with zero residual value. On

September 30 commaSeptember 30,

20182018,

ThriftyThrifty

sold the fixtures for

$ 5 comma 900$5,900

cash. Record both depreciation expense for

20182018

and sale of the fixtures on

September 30September 30,

20182018.

(Record debits first, then credits. Select the explanation on the last line of the journal entry table.)

Begin by recording the depreciation expense as of

September 30September 30,

20182018.

Date

Accounts and Explanation

Debit

Credit

Sep. 30

Depreciation Expense—Fixtures

2520

Accumulated Depreciation—Fixtures

2520

To record depreciation on fixtures.

Before recording the sale of the fixtures, let's calculate any gain or loss on the sale of the fixtures.

Market value of assets received

14,000

Less: Book value of asset disposed of

Cost

5,900

Less: Accumulated Depreciation

(2520)

8420

Gain or (Loss)

5580

Now, record the sale of the fixtures on

September 30September 30,

20182018.

Date

Accounts and Explanation

Debit

Credit

Sep. 30

Depreciation Expense—Fixtures

2520

Accumulated Depreciation—Fixtures

2520

To record depreciation on fixtures.

Explanation / Answer

cost of fixtures = 14000

Double depreciation rate = 40% (100% / 5 *2)

Hence dep in first year = 14000 * 40% = 5600

Accumulated dep = 5600

Remaining cost =14000 - 5600 = 8400

loss on sale = 8400 - 5900 ( sale price)

= 2500

Particulars Debit Credit Cash a/c 5900 Accumulated dep 5600 Loss on sale 2500 Fixtures account 14000

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