As part of a major renovation at the beginning of the year, Atiase Pharmaceuticals, Inc., sold shelving units (recorded as Equipment) that were 10 years old for $800 cash. The shelves originally cost$6,400 and had been depreciated on a straight-line basis over an estimated useful life of 10 yearswith an estimated residual value of $400. Assuming that depreciation has been recorded to the dateof sale, show the effect of the disposal on the accounting equation. Prepare the journal entry torecord the sale of the shelving units.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
As part of a major renovation at the beginning of the year, Atiase Pharmaceuticals, Inc., sold shelving units (recorded as Equipment) that were 10 years old for $800 cash. The shelves originally cost
$6,400 and had been
with an estimated residual value of $400. Assuming that depreciation has been recorded to the date
of sale, show the effect of the disposal on the
record the sale of the shelving units.
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