14 \"Sales\" is a revenue account and like all revenue accounts it goes up with
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Question
14 "Sales" is a revenue account and like all revenue accounts it goes up with a credit. "Sales Returns Allowances " is a contra-revenue account that goes up with a debit. What does it mean when a merchant debits her Sales Returns & Allowances account? Why would a merchant use the contra-account rather than simply, directly reducing the Sales account? 21 When a company sells a piece of equipment, it must zero-out the accounts related to that equipment to get it off the books. In this process, the company may record a gain or loss on the sale. What is the journal entry to record a sale of equipment at a gain? What is the journal entry to record a sale of equipment at a loss? Or as a "break even" transaction?Explanation / Answer
(1)
Some companies do not maintain a 'Sales Returns and Allowances" account. They record customer returns by directly debiting "Sales". However, it is good to maintain the aforementioned account to be able to track returns and allowances and make decisions about them if necessary
(2)
If the asset is sold off or otherwise disposed of. A write off involves removing all traces of the fixed asset from the balance sheet, so that the related fixed asset account and accumulated depreciation account are reduced.
Gain : ABC Corporation buys a Equipment for $100,000 and recognizes $10,000 of depreciation per year over the following ten years. On first day of the 7th year company decided to sell the same at $50000.
Now the situation is company has depreciated the asset amounting to$60,000
Selling price is $50,000
Gain to the company is $10,000
Following Journal will be passed
Cash A/C 50000
Accumulated depreciation 60000
Equipment Account 100,000
Gain on sale of Equipment 10000
Loss :ABC Corporation buys a Equipment for $100,000 and recognizes $10,000 of depreciation per year over the following ten years. On first day of the 7th year company decided to sell the same at $30000.
Now the situation is company has depreciated the asset amounting to$60,000
Selling price is $30,000
Loss to the company is $10,000
Following Journal will be passed
Cash A/C 30000
Loss on sale of Equipment 10000
Accumulated depreciation 60000
Equipment Account 100,000
Break Even :ABC Corporation buys a Equipment for $100,000 and recognizes $10,000 of depreciation per year over the following ten years. On first day of the 7th year company decided to sell the same at $40000.
Now the situation is company has depreciated the asset amounting to$60,000
Selling price is $40,000
Profit/Loss to the company is $0
Following Journal will be passed
Cash A/C 40000
Accumulated depreciation 60000
Equipment Account 100,000
(3)
For Interest Receivable entry to be passed on 31st December
Interest Receivable 2,105 (140000*61days/365*9%)
Interest Income 2,105
Entry to be passed on 30th January
Interest Receivable 1,001 (140000*29days/365*9%)
Interest Income 1,001
Cash 3,106
Interest Receivable 3,106
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