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Lets say a real estate company have been doing business for 1 year, they own $2000 worth of houses and accum depreciation is $200. They only rent their houses all year, BUT they decided to put a house on sales at the end of the financial year. Lets just say the house’s value is 200 and depreciation for the year for this house is 20. So what is the journal entry for this?
1) Do i just Dr closing inventory 200, Cr houses 200 ? But if i did this, what about the 20 depreciation for this particular house, do we ignore it?
2) After i do the reclassification, Dr closing inventories, do we need to put this in income statement’s Less: closing inventory? If thats the case, their COGS will be Opening inventory(0, since they dont have inventory until today) – Closing inventory(200) = -200
This is not in the syllabus for Paper FA.
You could only be asked to account for the sale of a non-current asset, and the entries for this are explained in full in my free lectures on non-current assets.
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