Question

On January 2, 2018, Bright Uighting purchased showroom fodtures for $21,000 cash, expecting the fixtures to remain in service for 4 years. Bright Lghting has deprociated the fxtures on a straight-line basis, with zero residual value. On April 30,2019 , Bright Lighting sold the fixtures for $7,300 cash. Record both the depreciafion expense on the fictures for 2019 and the sale of the fatures on April 30, 2019. Round intermediate cetculations to the noarest cent and final answors to the nearest whole dollar.

Answer 1

Using straight-line depreciation, Bright Lighting recognizes a depreciation expense of $1,750 for the fixtures in 2019 until the sale date. They sell the fixtures for $7,300, resulting in a loss of $6,700 based on the book value at the time of sale.

Step-by-step explanation:

To calculate depreciation for the showroom fixtures bought by Bright Lighting, we use the straight-line depreciation method. The total cost of the fixtures is $21,000, and they are expected to last for 4 years with a residual value of $0. Therefore, the annual depreciation would be $21,000 / 4 years = $5,250 per year. From January 2, 2018, to April 30, 2019, Bright Lighting would have depreciated the fixtures for 1 year and 4 months (or 1.33 years). The depreciation expense for the first part of 2019 until the sale on April 30 would be $$5,250 / 12 months * 4 months = $1,750.

When Bright Lighting sells the fixtures for $7,300 on April 30, 2019, they would record a loss or gain based on the book value at the time of sale. As of April 30, the accumulated depreciation would be $5,250 (for 2018) + $1,750 (for Jan-Apr 2019), totaling $7,000. Therefore, the book value of the fixtures at the time of sale would be $21,000 (initial cost) - $7,000 (accumulated depreciation) = $14,000. Since the fixtures are sold for $7,300, Bright Lighting would record a loss of $14,000 - $7,300 = $6,700.