(Straight-line amortization, LO 2, 3, 6) Roxana Inc. (Roxana) recently purchased new furniture for the reception area of the company’s head office. The furniture itself cost $30,000, taxes were $4,500, delivery cost $1,000, and set-up cost $700.

Roxanna’s management expects to use the furniture for six years, at which time it will be replaced. Management expects that the new furniture will have a residual value after six years of $5,500.

Required:

a. Prepare the journal entry to record the purchase of the new furniture.

b. Prepare an amortization schedule showing the amortization expense for each of the six years Roxana expects to keep the furniture and the NBV of the furniture at the end of each year. Assume that the furniture was purchased midway through the fiscal year and only a half-year’s amortization is to be expensed in the first year.

c. Suppose the furniture was sold at the end of the fourth year for $12,000.

Prepare the journal entry to record the sale and any other journal entries required with respect to the furniture in the fourth year.