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