Question :
The club sold all its furniture of book value Rs.9,000 for Rs.4,500. It purchased new furniture of Rs.20,000 in the mid year. Depreciation charged @ 10%. This information will be shown as under:
Option 1: Loss on sale of furniture Rs.4,500 and depreciation Rs.2.000 debited to Income and Expenditure A/c
Option 2: Loss on sale of furniture Rs.2,000 and depreciation Rs.4,500 credited to Income and Expenditure A/c
Option 3: Balance Sheet as furniture at Rs.13,500
Option 4: None of these
Correct Answer: Loss on sale of furniture Rs.4,500 and depreciation Rs.2.000 debited to Income and Expenditure A/c
Solution :
It is because p.a. word is missing after 10% therefore time period of mid year will be ignored. Depreciation of furniture = Rs.20,000 X 10% = Rs.2,000 is to be debited to Income and Expenditure Account.
Loss on sale of furniture = Rs.9,000 - Rs.4,500 = Rs.4,500 is to be debited to Income and Expenditure Account.
Hence, the correct option is 1.