The company purchased furniture on April 1, 2020 for $5,630. On the same date, furniture with...

The company purchased furniture on April 1, 2020 for $5,630.

On the same date, furniture with an original cost of $119,961, was sold for $66,438.

Calculate the maximum impact on business income for the year from furniture and other miscellaneous tangible capital assets.

Expert Solution

Journal Entries for the purchase of asset is as under:-

Furnitures A/c Debit - $5630

Cash Account Credit - $5630

Journal Entry for the sale of asset on loss as under:-

Cash Account Debit - $66438

Loss on Sale of Furniture - $53523

Furnitures A/c Credit $119961

Since accumulated depreciation or carrying value is not given in the question, the loss is calculated on the given furniture value. However to calculate the exact profit / loss on sale of any fixed asset the value of accumulated depreciation and assets carrying value has a vital role.

The loss of sale of assets is considered a non-operational loss to the business to the value of $ 53,523/- and to be shown as a deduction in income statement. Hence business profit will be showing a less figure after adjusting the loss.

ekkarill92 answered 2 years ago

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