Question
Assume that Tsua Enterprises purchased an asset on January 1, 2015, for $60,000. The asset had an estimated life of six years and an estimated
Assume that Tsua Enterprises purchased an asset on January 1, 2015, for $60,000. The asset had an estimated life of six years and an estimated residual value of $6,000. The company used the straight-line method to depreciate the asset.
Assume that Tsua Enterprises sold the asset on July 1, 2017, and received $15,000 cash and a note for an additional $15,000.
Required:
1. Identify and analyze the effect of the transaction for depreciation for 2017.
Activity | Operating |
Accounts | Depreciation Expense Decrease, Accumulated Depreciation - Asset Increase |
Statement(s) | Balance Sheet and Income Statement |
How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.
Balance Sheet | Income Statement | |||||||||||||
Stockholders' | Net | |||||||||||||
Assets | = | Liabilities | + | Equity | Revenues | Expenses | = | Income | ||||||
Identify and analyze the effect of the sale of the asset.
Activity | |
Accounts | |
Statement(s) |
How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.
Balance Sheet | Income Statement | |||||||||||||
Stockholders' | Net | |||||||||||||
Assets | = | Liabilities | + | Equity | Revenues | Expenses | = | Income | ||||||
Cash | ||||||||||||||
Note Receivable | ||||||||||||||
ccumulated Depreciation - Asset |
2. How should the gain or loss on the sale of the asset be presented on the income statement?
The gain or loss should appear in the operating expenses,other income/expense category, revenue of the income statement to indicate that it is,is not part of the normal operating activity of the company.
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