Florence Corporation sold for $20,000 plant assets that cost $40,000 and that had an accumulated depreciation of $8,000.The journal entry to record the transaction is:

Question

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The journal entry to record the sale of plant assets should reflect the cash received, the accumulated depreciation (which reduces the book value of the assets), and any gain or loss on the sale. In this case, the cash received is $20,000, the accumulated depreciation is $8,000, and the book value of the assets is $32,000 ($40,000 cost - $8,000 accumulated depreciation). However, since the assets were sold for $20,000, there is a loss of $12,000 ($32,000 book value - $20,000 sale price). Therefore, the correct entry is: Cash 20,000, Accumulated Depreciation 8,000, Loss on Sale of Plant Assets 12,000, Plant Assets 40,000.

Florence Corporation Sold for $20,000 Plant Assets That Cost $40,000