Final answer:
To record the sale, an entry with a $4,000 debit to Accumulated Depreciation, a $5,000 credit to Furniture, a $1,200 debit to Cash, and a $200 debit to Loss on Disposal is needed.
Step-by-step explanation:
The question pertains to the recording of a sale of assets and the corresponding accounting entries. Dew Drop Inn sold 10 beds that cost $500 each for a total of $1,200 cash. The accumulated depreciation on the beds at the time of sale was $4,000. To record the sale, we have to consider the cost of the beds, the accumulated depreciation, the cash received, and the loss on the sale.
The original cost of the beds ($500 each × 10) was $5,000. The entry to record the sale includes a $4,000 debit to Accumulated Depreciation to remove the depreciation associated with the beds, a $5,000 credit to Furniture to remove the cost of the beds from the books, a $1,200 debit to Cash to show the cash received, and finally, because the cash received is less than the book value of the beds (cost minus accumulated depreciation, or $5,000 - $4,000 = $1,000), there is a $200 debit to Loss on Disposal.
There would not be any credit to Gain on Disposal since the sale resulted in a loss, not a gain.