I) Company P sold a haI) Company P sold a half-depreciated asset with an origina
ID: 2444490 • Letter: I
Question
I) Company P sold a haI) Company P sold a half-depreciated asset with an original cost of $10,000 and annual depreciation of $500 to company S for $8,000. Company S recognized $400 in depreciation expense on the asset and it has been paid for. AccountDebitCredit Fixed Asset Gain on Sale of Asset Depreciation Expense Accumulated Depreciationlf-depreciated asset with an original cost of $10,000 and annual depreciation of $500 to company S for $8,000. Company S recognized $400 in depreciation expense on the asset and it has been paid for. JE
Account Debit Credit Fixed Asset Gain on Sale of Asset Depreciation Expense Accumulated Depreciation
Account Debit Credit Fixed Asset Gain on Sale of Asset Depreciation Expense Accumulated DepreciationExplanation / Answer
Journal Entry in Books of P Account Debit Credit Depriciation A/c 100 Accumulated Depriciation 100 ( To record depriciation expense till date of sale) Annual depriciation - Depriciation booked by S 500 - 400 = 100 Accumulated Depriciation 5100 Fixed Asset 5100 ( To record transfer of accumulated depriciation to Fixed asset on sale) Asset has been half depriciated ie depriciation already booked is 10000/2 = 5000. Further 100 has been charged to depriciation Hence total depriciation is 5000 + 100 = 5100 Bank A/c 8000 Fixed Asset * 4900 Gain on sale of Fixed Asset (balancing figure) 3100 ( To record sale of asset to S ) * Fixed Asset = original Cost - accumulated depriciation = 10000 - 5100 = 4900