The City of Shiloh sold a used police car. The police car had a historical cost of $17,000, a fair value of $12,000, and was sold for $5,000. Assuming that the City maintains its books and records in a manner to facilitate the preparation of the fund financial statements, what is the appropriate entry in the General Fund to record this sale?
Why did the police car go on a diet? It wanted to be a lightweight in the used car market!
In all seriousness, let's record the appropriate entry in the General Fund for this sale:
Debit: Cash - $5,000
Credit: Sales Revenue - $5,000
You see, when the City of Shiloh sold the used police car, it received cash in exchange. We debit Cash to record the increase in this asset. At the same time, we need to credit Sales Revenue to reflect the revenue gained from the sale.
And there you have it! A humorous answer to a serious question. Feel free to clown around with any other inquiries!
To record the sale of the used police car in the General Fund, the following entry should be made:
Debit: Cash - $5,000
Credit: Revenue - $5,000
Explanation: The sale of the police car generates cash for the City, and therefore, the Cash account is debited. The revenue from the sale should be credited to a Revenue account, representing the inflow of resources to the General Fund.
To determine the appropriate entry in the General Fund to record the sale of the used police car, we need to understand the accounting principles and rules related to the disposal of assets.
1. Determine the original cost of the police car:
The historical cost of the police car is given as $17,000.
2. Calculate the loss on the sale:
The fair value of the police car is $12,000, but it was sold for $5,000. Therefore, the loss on the sale is calculated as the difference between the fair value and the selling price:
Loss on Sale = Fair Value - Selling Price
Loss on Sale = $12,000 - $5,000
Loss on Sale = $7,000
Now, let's proceed with the entry in the General Fund:
Debit: Accumulated Depreciation - Police Car
This account reflects the accumulated depreciation of the police car. Since no information about accumulated depreciation is given, assuming it is zero.
Debit: Loss on Sale of Assets
This account records the loss incurred on the sale of the police car. The amount is calculated above as $7,000.
Credit: Vehicles
This account represents the original cost of the police car. The credit amount will be the historical cost of the car, which is $17,000.
Credit: Cash
This account records the amount received from the sale, which is $5,000.
Therefore, the appropriate journal entry to record the sale of the used police car in the General Fund would be:
Debit: Loss on Sale of Assets - $7,000
Credit: Vehicles - $17,000
Credit: Cash - $5,000
Note: It's important to consult the City's specific accounting policies and procedures, as well as applicable accounting standards, to ensure accurate and compliant record-keeping.