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.

Solutions

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 1 year ago

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