Question

As part of a major renovation at the beginning of the year, Bonham's Bakery sold shelving units (store fixtures) that were 8 years old for $2,400 cash. The original cost of the shelves was $6,800 and they had been depreciated on a straight-line basis over an estimated useful life of 10 years with an estimated residual value of $1,100.

 

Record the sale of the shelving units. 

Answer 1

1. Calculation of Accumulated Depreciation for 10 Years

Accumulated Depreciation for 10 Years = (Original cost of the equipment - Residual value / useful life ) * 10 Years

=($6,800 - $1,100 /10) * 10 Years

=$5,700

2. Calculation of book value of equipment

Book value of equipment = original cost of the equipment  - Accumulated depreciation for 10 Years

=$6,800 - $5,700

=$1,100

3.Calculation of Gain on sale of Equipment

Gain on Sale of Equipment = Selling price of Equipment - Book Value of Equipment

=$2,400 - $1,100

=$1,300

Transaction	General Journal	Debit$	Credit$
1	Cash A/C	2,400
	Accumulated Depreciation  Equipment A/c	5,700
	To Equipment A/C		6,800
	To Gain on sale of Equipment A/C		1,300
	( To record sale of Equipment)

Answer to the above question clearly shown in the explanation option