Question

Motor Sales sold its old office furniture for​ $6,000. The original cost was​ $16,000, and at the time of​ sale, accumulated depreciation was​ $14,000. What is the effect of this​ transaction?

Answer 1

The effect of this the de-recognition of the asset in the book to the tune of 2,000 in the balance sheet and the recognition of a gain on disposal to the tune of $4,000 in the p/l.

Step-by-step explanation:

cost = $16,000

Accumulated depreciation =​ $14,000

Net book value = $16,000 - $14,000

= $2,000

Sales price = $6,000

Gain on disposal = $6,000 - $2,000

= $4,000

The effect of this the derecognition of the asset in the book to the tune of 2,000 in the balance sheet and the recognition of a gain on disposal to the tune of $4,000 in the p/l.