Question

Rayya Co. purchases a machine for $100,800 on January 1, 2019. Straight-line depreciation is taken each year for four years assuming a eight-year life and no salvage value. The machine is sold on July 1, 2023, during its fifth year of service.
  
Prepare entries to record the partial year’s depreciation on July 1, 2023, and to record the sale under each separate situation. (1) The machine is sold for $50,400 cash. (2) The machine is sold for $42,336 cash.

Answer 1

Answer- Journal entry to record partial year's depreciation on July 1,2023-

Date	Accounts Titles & Explanation	Debit	Credit
		$	$
July 1 2023	Depreciation expense	6300
	Accumulated depreciation-Machinery		6300
	(Being entry recorded for depreciation)

Explanation- Straight line Method-Depreciation Expense Annual

= Cost of asset- Salvage value of asset/No. of useful life (years)

=($100800-$0)/8 years

=$100800/8 years

= $12600

Partial depreciation on July 1,2023 = ($12600*6 months)/12 months

= $6300

Journal entry to record the sale-

1)-

Date	Accounts Titles & Explanation	Debit	Credit
		$	$
July 1 2023	Cash	50400
	Accumulated depreciation-Machinery	56700
	Gain on sale of machinery		6300
	Machinery		100800
	(Being entry recorded for depreciation)

2)-

Date	Accounts Titles & Explanation	Debit	Credit
		$	$
July 1 2023	Cash	42336
	Accumulated depreciation-Machinery	56700
	Loss on sale of machinery	1764
	Machinery		100800
	(Being entry recorded for depreciation)