## Monday, 17 March 2014

### As part of a major renovation at the beginning of the year, Hauser Pharmaceuticals, Inc., sold shelving units (store fixtures) that were 11 years old for \$1,110 cash. The shelves originally cost \$6,330 and had been depreciated on a straight-line basis over an estimated useful life of 11 years with an estimated residual value of \$390. Assuming that depreciation has been recorded to the date of sale, show the effect of the disposal on the accounting equation. Required: (a) Assuming that depreciation has been recorded to the date of sale, show the effect of the disposal on the accounting equation. Indicate the effects (accounts, amounts, and + , – , or "NE" for no effect) of the transaction. Assets = Liabilities + Stockholders' Equity Cash +1,110 No effect NE Gain on disposal +720 Store fixtures -6,330 Accumulated depreciation +5,940 ________________________________________ (b) Prepare the journal entry to record the sale of the shelving units. (Omit the "\$" sign in your response.) General Journal Debit Credit Cash Accumulated depreciation on store fixtures Store fixtures Gain on sale of store fixtures ________________________________________ rev: 10_14_2011 Explanation: Store fixtures (original cost) \$ 6,330 Accumulated depreciation at the end of 11 year Depreciation expense = (\$6,330 cost – \$390 residual value) × 1/11 = \$540 Accumulated depreciation = \$540 annual depreciation expense × 11 yrs = 5,940 ________________________________________ ________________________________________ Book value at the end of tenth year (i.e., immediately prior to sale) \$ 390 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ Proceeds on sale \$ 1,110 Book value (390 ) ________________________________________ ________________________________________ ________________________________________ Gain on sale \$ 720

 As part of a major renovation at the beginning of the year, Hauser Pharmaceuticals, Inc., sold shelving units (store fixtures) that were 11 years old for \$1,110 cash. The shelves originally cost \$6,330 and had been depreciated on a straight-line basis over an estimated useful life of 11 years with an estimated residual value of \$390. Assuming that depreciation has been recorded to the date of sale, show the effect of the disposal on the accounting equation.

 Required: (a) Assuming that depreciation has been recorded to the date of sale, show the effect of the disposal on the accounting equation. Indicate the effects (accounts, amounts, and + , – , or "NE" for no effect) of the transaction.

 Assets = Liabilities + Stockholders' Equity Cash +1,110 No effect NE Gain on disposal +720 Store fixtures -6,330 Accumulated depreciation +5,940

 (b) Prepare the journal entry to record the sale of the shelving units. (Omit the "\$" sign in your response.)

 General Journal Debit Credit Cash Accumulated depreciation on store fixtures Store fixtures Gain on sale of store fixtures

rev: 10_14_2011

Explanation:
 Store fixtures (original cost) \$ 6,330 Accumulated depreciation at the end of 11 year Depreciation expense = (\$6,330 cost – \$390 residual value) × 1/11 = \$540 Accumulated depreciation = \$540 annual depreciation expense × 11 yrs = 5,940 Book value at the end of tenth year (i.e., immediately prior to sale) \$ 390

 Proceeds on sale \$ 1,110 Book value (390 ) Gain on sale \$ 720