O'Reilly logo

Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

SOLUTION TO EXERCISE 9-7

images

Explanations:

Furniture. There is no salvage (residual) value; hence, the book value ($1,200) is written off as a loss.

Automobile. The book value ($8,000 - $3,500 = $4,500) is removed from the accounts. The cash recovered ($3,100) is recorded. The book value exceeds the cash; therefore, a loss is recorded for the difference.

Land. The book value ($40,000) is removed from the accounts. The net proceeds ($100,000 - $8,000 = $92,000) is recorded. The commission is a cost of the disposal rather than an operating expense; hence, it is a reduction of the gain or increase in the loss on disposal. (In this case, it is a decrease in gain.) The excess of the net proceeds ($92,000) over the book value ($40,000) is recorded as a gain.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required