Question

1. The following assets were sold by DNC Company during the 2021 fiscal year. The company's year end is December 31.

Asset	Vehicle	Computer	Furniture
Original cost	$ 60,000	$ 8,000	$ 18,000
Accumulated depreciation (January 1, 2021)	$ 35,000	$ 7,000	$ 7,000
Depreciation method	Diminishing-balance	Straight-line	Straight-line
Depreciation rate / years remaining	25%	2 years	8 years
Estimated residual value	not applicable	not applicable	not applicable
Selling price	$ 22,500	$ 708	$ 14,000
Date of sale in 2021	April 1	August 1	October 31

2. Instructions
   Compute the gain or loss on disposal for each asset sold and prepare any necessary journal entries to record the disposals for DNC. (Round your answers to the nearest dollar)

Answer 1

Computation of gain/loss on disposal for each asset sold is given below:

Asset		Vehicle	Computer	Furniture
Original cost	a	60,000	8,000	18,000
Accumulated Depreciation (January 1, 2021)	b	35,000	7,000	7,000
WDV as on January 1, 2021	c=a-b	25,000	1,000	11,000
Depreciation method		Diminishing balance	Straight line	Straight line
Depreciation rate / years remaining		25%	2 years	8 years
Estimated residual value		NA	NA	NA
Selling price	d	22,500	708	14,000
Date of sale in 2021		1st April	1st August	31st October
Period for which depreciation is to be charged in 2021		3 months	7 months	10 months
Depreciation charged	e	1,563	292	1,146
		c * 25% * 3/12	c/2 * 7/12	c/8 * 10/12
Accumulated depreciation on date of sale	f = b+e	36563	7292	8146
WDV as on the date of sale	g = c-e	23,437	708	9,854
Gain (+) / Loss (-) on sale of asset	h=d-g	-937	0	4,146

Journal entries in the books of DNC Company for disposal of assets during the 2021 fiscal year:

Date	Account titles	Debit (in $)	Credit (in $)
2021
April 1	Depreciation expense	1,563
	Accumulated Depreciation - Vehicle		1,563
	(To record depreciation on vehicle)
April 1	Cash	22,500
	Loss on sale of asset	937
	Accumulated Depreciation - Vehicle	36,563
	Vehicle		60,000
	(To record disposal of vehicle)
Date	Account titles	Debit (in $)	Credit (in $)
2021
August 1	Depreciation expense	292
	Accumulated Depreciation - Computer		292
	(To record depreciation on computer)
August 1	Cash	708
	Accumulated Depreciation - Computer	7,292
	Computer		8,000
	(To record disposal of computer)
Date	Account titles	Debit (in $)	Credit (in $)
2021
October 31	Depreciation expense	1,146
	Accumulated Depreciation - Furniture		1,146
	(To record depreciation on furniture)
October 31	Cash	14,000
	Accumulated Depreciation - Furniture	8,146
	Gain on sale of asset		4,146
	Furniture		18,000
	(To record disposal of furniture)