Kelly Petroleum Products owns fully depreciated furniture that was purchased for $26,500. The furniture had an estimated useful life of 8 years and an estimated residual value of $2,500. The furniture was sold for $2,700. Which of the following is the correct entry to record the transaction?

Question

Quizplus · Accepted Answer

Since the furniture was fully depreciated, there is no accumulated depreciation to record. The sale of the furniture results in a gain, which is calculated as the selling price ($2,700) minus the book value (which is the original cost minus the estimated residual value, or $26,500 - $2,500 = $24,000). Therefore, the entry should credit furniture for $26,500, debit accumulated depreciation for $24,000 (which is zero since the furniture was fully depreciated), debit cash for $2,700, and record a gain on sale of furniture for $1,200 (which is the difference between the selling price and the book value). Choice B matches these requirements.

Kelly Petroleum Products Owns Fully Depreciated Furniture That Was Purchased