Question

On January 2, 2016. Royal Pot purchased fixtures for $22,600 cash, expecting the fixtures to remain in service for nine years. Royal Pet has depreciated the factures on a straight line basis with $1,000 residual value. On April 30, 2018. Royal Pet sold the statures for $15.500 cash Record both depreciation expense for 2018 and sale of the factures on April 30, 2018. (Assume the modified half- month convention is used. Record debits first, then credits Select the explanation on the last line of the journal cetry table) Worke nt Scc Begin by recording the depreciation expense as of Apr 30, 2018 Date Accounts and Explanation Debit Credit apts: Apr 30 somer Submi 9115 1-3 (sin -110 #-23 (si 5 (similart O (similar ? similar

Answer 1

Royal Pet:

Depreciation = (Cost of the assets - Salvage value) / Useful life

Depreciation = (22,600 - 1000)/9

Depreciation = $ 2,400 per year

Book value as on 31st December 2017 :

Cost of the assets	$ 22,600
Less: Depreciation for 2016	($ 2,400)
Less: Depreciation for 2017	($ 2,400)
Book value	$ 17,800

Loss/Profit on Sale :

Book value as on 31st December 2017	$ 17,800
Less: Depreciation for 2018 (2400/2) * Half year conversation	($ 1,200)
Book value as on 30th April 2018	$ 16,600
Less: Sale proceeds	($ 15,500)
Loss on Sales	$ 1,100

Journal entry on 30th April 2018:

A	Depreciation for 2018:		Dr	Cr
	Depreciation account	Dr	$ 1,200
	To Fixtures account			$ 1,200
B	Recording sale proceeds and arriving at loss/ profit:
	Cash account	Dr	$ 15,500
	Loss on sale of fixtures	Dr	$ 1,100
	To Fixtures account			$ 16,600
C	Transferring the Depreciation expenses and loss on sale of fixtures:
	Profit and Loss account	Dr	$ 2,300
	To Loss on sale of fixtures			$ 1,100
	To Depreciation account			$ 1,200