Question

Augustine Ltd. sold some office furniture for $4,000cash. The furniture cost $17,000 and had accumulated depreciation through the date of sale totaling $10,200. The journal entry to record the sale of the furniture will include a:

Select one:
a. credit to Orfice Furniture for $6,800
b. debit to Loss on Sale for $2,800
c. credit to Gain on Sale of Furniture for $4,000
d. debit to Accumulated Depreciation for $6,800

Answer 1

The correct journal entry for Augusta Ltd.'s sale of office furniture includes a debit to Loss on Sale for $2,800, as the furniture's book value was $6,800 and it sold for $4,000. This represents a loss since the sale proceeds are less than the book value.

Step-by-step explanation:

To determine the appropriate journal entry for Augustine Ltd.'s sale of office furniture, we need to first work out the book value of the furniture at the time of sale, and then compare that with the sale proceeds to see whether there is a gain or a loss.

The cost of the furniture is $17,000, and it has accumulated depreciation of $10,200. Thus, the book value is $17,000 - $10,200 = $6,800. The furniture was sold for $4,000, which is less than the book value.

Here's the calculation and the resulting journal entry for the sale:

• Book Value of Furniture = Cost of Furniture - Accumulated Depreciation = $17,000 - $10,200 = $6,800
• Loss on Sale = Book Value - Sale Proceeds = $6,800 - $4,000 = $2,800
• Debit Cash for the sale proceeds of $4,000
• Debit Accumulated Depreciation for $10,200 to remove it from the books
• Credit Office Furniture for the original cost of $17,000
• Debit Loss on Sale of Furniture for $2,800 to recognize the loss

Thus, the correct journal entry will include a debit to Loss on Sale for $2,800.