Question

If a fixed asset with an original cost of 18,000 and accumulated depreciation of 2000 and sold for 15,000 the company must

Answer 1

Fixed assets are the assets held for use of more than 1 accounting period, this assets are reduced to the extent of there value reduction over the period of time due to damages, or lapse of time etc. this value reduction is said to be as depreciation.

The depreciation is an non cash expenses charged every year in the income statement reducing the value of assets which is accumulated and shown seperately in accumulated depreciation account. this accumulated depreciation is the total of depreciation being charged on the assets till date.

When the fixed assets is sold, the cash or some consideration is realised from it , this consideration or cash is debited as it is an assets which comes in the business and the assets is credited with the cost value as it is going out of the business. Any remaining of it is either a profit or loss.

In the given case, the Fixed assets cost = 18,000 , accumulated depreciation = 2000 and sold value = $ 15000.

Value of the assets at the date of sale = Cost - Accumulated depreciation

Value of the assets at the date of sale = 18000 - 2000 = 16000

Thus Loss on sale of assets =Value of the assets at the date of sale - Sales value

Thus Loss on sale of assets = 16000 - 15000 = 1000.

so if a fixed asset with an original cost of 18,000 and accumulated depreciation of 2000 and sold for 15,000 the company must report a loss on sale of fixed assets of 1000.

The Journal entry :

Date	Accounts and Explanation	Debit	Credit
1	Cash	15,000
	Accumulated depreciation	2,000
	Loss On sale of assets	1,000
	Fixed Assets		18,000
	( To record sales of asset on loss)