Question

Caesars Company is having an office furniture with its useful life 7 years and sold its furniture by the end of its 5^th year (May 2019). Sales price of this transaction is $75 000. The purchase price of the furniture was $350 000 and it was purchased in June 2014. Based on this information, assume that the company is using straight-line depreciation method. Prepare the Journal voucher of a) the depreciation booking for the year 2019 and b) the booking of selling the fixed asset.

Answer 1

Purchase price of asset = $350,000

depreciation straight line basis = 350000 / 7 = 50000 each year

Value of asset on may 2019 = 350000 - (50000 x 5) = 100,000

asset valuing 100,000 is sold for 75,000 which results in 25,000 loss on sale of asset.

a)

Journal voucher for depreciation booking

Year : 2019

Reference

Description

Debit

Credit

Depreciation a/c dr 50,000

to fixed asset a/c 50,000

(depreciation for the year 2019 charged

on fixed asset)

-------------------------------------------------------------------------------------------------------------------

profit and loss a/c dr 50,000

to Depreciation a/c 50,000

(Depreciation transferred to p/l account)

-------------------------------------------------------------------------------------------------------------------

b)   

Journal voucher for selling the fixed asset   

Year : 2019

Reference

Description

Debit

Credit

Depreciation a/c dr 50,000

to fixed asset a/c 50,000

(fixed asset value decreases by charging

depreciation)

--------------------------------------------------------------------------------------------------------------------

Bank a/c dr   75,000

profit and loss a/c dr 25,000   

to Fixed asset a/c 100,000

( Fixed asset valuing 100,000 is sold

for 75,000 and the loss on sale of

fixed asset 25,000 is transferred to

profit and loss account)