Question

On January 2, 2016, Pet Oasis purchased fixtures for $20,200 cash, expecting the fixtures to remain in service for eight years. Pet Oasis has depreciated the fixtures on a straight-line basis, with $1,000 residual value. On August 31, 2018, Pet Oasis sold the fixtures for $10,300 cash. Record both depreciation expense for 2018 and sale of the fixtures on August 31, 2018. (Assume the modified half-month convention is used. Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin by recording the depreciation expense as of Aug. 31, 2018. Date Accounts and Explanation Debit Credit Aug. 31

Answer 1

Depreciation for each year = (20200 -1000) / 8 = 2400

Depreciation for 8 months up to Aug 31 = 2400 * 8/12 = 1600

Journal entry to record depreciation:

Date	Account Titles and explanation	Debit	Credit
Aug 31	Depreciation expense - Fixtures	1600
	Accumulated depreciation - fixtures		1600
	[(20200-1000)/8] *8 /12]

Determining the gain or loss on sale:

Market value of assets received		10300
Less: Book value of asset disposed of
Cost	20200
Less: Accumulated Depreciation	6400	13800
Gain or (Loss)		(3500)

*Since it is a loss, brackets are to be put.

Accumulated depreciation = 2400 * 2 + 1600 = 6400

Journal entry to record sale of asset:

Date	Account Titles and explanation	Debit	Credit
Aug 31	Cash	10300
	Accumulated depreciation - fixtures	6400
	Loss on sale of fixtures	3500
	Fixtures		20200

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