Question

Marionnette International is a worldwide operator and franchisor of hotels and related lodging facilities totaling nearly $1.6 billion in net property and equipment. Assume that Marionnette replaced furniture that had been used in the business for five years. The records of the company reflected the following regarding the sale of the existing furniture.

Furniture (cost)	$	6,190,000
Accumulated depreciation		5,680,000

Required:

1. Prepare the journal entry for the disposal of the furniture, assuming that it was sold for: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars not in millions.)

a. $510,000 cash

b. $1,611,000 cash

c. $404,000 cash

Answer 1

1.

a. Calculation of profit or loss on sale of furniture:

Sale price = $510,000

Cost of furniture at the time of sale = 6,190,000 - 5,680,000 = $510,000

Profit/Loss = sale price - cost price = 510,000 - 510,000 =0

Journal entry:

Cash A/c Dr. 510,000

To Furniture A/c. 510,000

b. Calculation of profit or loss on sale of furniture:

Sale price = $1,611,000

Cost of furniture at the time of sale = 6,190,000 - 5,680,000 = $510,000

Profit/Loss = sale price - cost price = 1,611,000 - 510,000 = $1,101,000

Journal entry:

Cash A/c Dr.   1,611,000

To Furniture A/c.   510,000

To Profit / Loss A/c. 1,101,000   

c. Calculation of profit or loss on sale of furniture:

Sale price = $404,000

Cost of furniture at the time of sale = 6,190,000 - 5,680,000 = $510,000

Profit/Loss = sale price - cost price = 404,000 - 510,000 = ($106,000)

Journal entry:

Cash A/c Dr. 404,000

Profit / Loss A/c. 106,000

To Furniture A/c.   510,000