Question

E8-17 Elects of the disposal of an asset Becording the Disposal of an Asset at Three Different Sale Prices urria International is a worldwide operator and franchiser of hotels and related lodging facilities oling nearly $1.5 billion in het property and equipment. Asume that Murrit replaced furniture that when used in the business for five years. The records of the company reflected the ing the sale of the existing furniture: Furniture (cost) $8,000,000 Accumulated depreciation 7.700,000 ing facilities L08-5 Give the journal entry for the disposal of the furniture, assuming that it was sold for 4 $300,000 cash $900,000 cash c. $100,000 cash 2. Based on the three pr baterie on the three preceding situations, explain the effects of the disposal of an asset. Leeldental Loss on a Long-Lived Asset (Straight-Line E8-18 LO8-38- -

Answer 1

1) Accumulated Depreciation Dr 7,700,000

To Furniture 7,700,000

(Being depreciation adjusted)

a) Bank Dr 300,000

To Furniture 300,000

(Being furniture sold)

b) Bank Dr 900,000

To Furniture 300,000

To Profit & Loss 600,000

(Being furniture sold)

c) Bank Dr 100,000

Profit & Loss Dr 200,000

To Furniture 300,000

(Being furniture sold)

2) On disposal of asset, accumulated depreciation will be transferred to asset a/c. If asset is sold for a price more than its net value, difference will be credited to Profit & Loss A/c. If asset is sold for a price lower than its net value, difference will be debited to Profit & Loss A/c. If asset is sold for a price equal to its net value, there will be neither profit nor loss.