Question

Assume that on January? 2, 2014?, Potter of Michigan purchased fixtures for $ 8600 ?cash, expecting the fixtures to remain in service for five years. Potter has depreciated the fixtures on a? double-declining-balance basis, with $ 1100 estimated residual value. On October 31?, 2015?, Potter sold the fixtures for $ 2 800 cash. Record both the depreciation expense on the fixtures for 2015 and the sale of the fixtures. Apart from your journal? entry, also show how to compute the gain or loss on Potter?'s disposal of these fixtures.

Answer 1

Journal Entries
Date	General Journal	Debit	Credit
.january 2 2014	Fixtures	$ 8,600.00
	Cash		$ 8,600.00
	(Fixtures Purchased)
.December 31 2014	Depreciation Expense-Fixtures	$ 3,440.00
	Accumulated Depreciation-Fixtures		$ 3,440.00
	(Depreciation Expense Charged)
.October 31 2015	Depreciation Expense-Fixtures	$ 1,720.00
	Accumulated Depreciation-Fixtures		$ 1,720.00
	(Depreciation Expense Charged for 10 Months)
.October 31 2015	Cash	$ 2,800.00
	Loss on sale of Asset	$     640.00
	Accumulated depreciation -Fixtures	$ 5,160.00
	Fixtures		$ 8,600.00
	(Asset Sold and Loss Booked)

A	Cost	$                8,600.00
B	Residual Value	$                1,100.00
C=A - B	Depreciable base	$                7,500.00
D	Life [in years]	5
E=C/D	Annual SLM depreciation	$                1,500.00
F=E/C	SLM Rate	20.00%
G=F x 2	DDB Rate	40.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
2014	$                                8,600.00	40.00%	$ 3,440.00	$                  5,160.00	$ 3,440.00
2015	$                                5,160.00	40.00%	$ 1,720.00	$                  3,440.00	$ 5,160.00

Written down value of asset	$                                3,440.00
Sales Value	$                                2,800.00
Loss	$                                   640.00