Question

Recording Fixed Asset Disposal Manchester Company sells equipment on June 1, 2021, for $194,600 cash. Manchester incurred $1,120 of removal and selling costs on disposal. The equipment cost $350,000 when it was purchased on January 2, 2018. Its estimated residual value and useful life were $56,000 and 10 years, respectively. Manchester uses straight-line depreciation and records annual depreciation on each December 31. a. Prepare the journal entries needed to record the asset disposal on June 1, 2021. b. Record the journal entries if the equipment were abandoned (zero fair value) on June 1, 2021. Note: Record debit accounts in alphabetical order using the first letter of the account name. Date Cr. Dr. 24.500 X 0 49,000 x June 1,202 Account Name Depreciation Expense Accumulated Depreciation To update depreciation Accumulated Depreciation Cash Loss on Disposal Equipment To record the disposal of equipment 49.000 x 350,000 Dr. Cr. Date June 1, 2021 Account Name Depreciation Expense Accumulated Depreciation To update depreciation Accumulated Depreciation Loss on Disposal Equipment To record the disposal of equipment June 1, 2021 OM 350,000

Answer 1

	Cost	350000
	Less: Residual value	56000
	Depreciable cost	294000
	Divide by Useful life	10
	Annual Depreciation	29400
	Acumulated depreciation for 3 years	88200	=29400*3
a
Date	Account Name	Dr.	Cr.
June 1,2021	Depreciation expense	12250		=29400*5/12
	Accumulated Depreciation		12250
June 1,2021	Accumulated Depreciation	100450		=88200+12250
	Cash	193480		=194600-1120
	Loss on Disposal	56070
	Equipment		350000
b
Date	Account Name	Dr.	Cr.
June 1,2021	Depreciation expense	12250
	Accumulated Depreciation		12250
June 1,2021	Accumulated Depreciation	100450
	Loss on Disposal	249550
	Equipment		350000