Question

Furniture costing $55,000 is sold at its book value in 2019. Acquisitions of furniture total $45,000 cash, on which no depreciation is necessary because it is acquired at year-end. Complete the general ledger accounts to calculate cash received from the sale of furniture.

Answer 1

Answer:

Debit Cash account $45,000

Credit Disposal account (p/l)  $45,000

Explanation:

When an asset is sold, the asset will be derecognized from the books. Where the sales proceed is more than the book value, the company recognizes a gain on disposal otherwise a loss.

Since the cost of the asset was $55,000 at sale, the general ledger  affected is the fixed asset ledger which is credited by $55,000 while the debit goes to the disposal account(p/l).

For the amount received for the disposal, the general ledger involved are cash and the disposal account (p/l). The entries required are debit cash and credit disposal account both with $45,000.