E7-37B. (Learning Objectives 2, 3: Analyzing the effect of a sale of a PPE; DDB depreciation)...

E7-37B. (Learning Objectives 2, 3: Analyzing the effect of a sale of a PPE; DDB depreciation) Assume that on January 2, 20X6, LaSalle of Lyon purchased fixtures for €8,400 cash, expecting the fixtures to remain in service for five years. LaSalle has depreciated the fixtures on a double-declining-balance basis, with €1,800 estimated residual value. On September 30, 20X7, LaSalle sold the fixtures for €2,200 cash. Record both the depreciation expense on the fixtures for 20X7 and then the sale of the fixtures. Apart from your journal entry, also show how to compute the gain or loss on LaSalle’s disposal of these fixtures.

Solutions

Expert Solution

Depreciation for the year 2016 using Double declining balance

= (Cost - Accumulation depreciation) x 2 X 1/useful life

= (€ 8,400-0) X 2 X 1/5

= € 3,360

Depreciation for the year 2017 using Double declining balance

= (Cost - Accumulation depreciation) x 2 X 1/useful life

= (€ 8,400-3,360) X 2 X (1/5) X (9/12)

= € 1,512

Total accumulation depreciation(€3,360+€1,512)	€ 4,872
Book value of fixtures as on September 30, 20X7 (€8,400 - € 4,872)	€ 3,528
Sale proceeds received for fixtures	€ 2,200
Loss on sale of fixtures	€ 1,328

Date	Accounts and explanation	Debit	Credit
Sep 30, 20X7	Depreciation Expense-Fixtures	€ 1,512
	Accumulation Depreciation -Fixtures		€ 1,512
	To record deprecation on fixtures for 9 months

Sep 30, 20X7	Cash	€ 2,200
	Accumulation Depreciation -Fixtures	€ 4,872
	Loss on disposal	€ 1,328
	Fixtures		€ 8,400
	Fixtures sold for cash

ekkarill92 answered 1 year ago

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