Homework Answers
Cost of new machine = Fair value of old machine + Cash exchanged = ($102,490) + ($286,500 - $102,490)
Cost of new machine = $102,490 + $184,010 = $286,500
Cash exchanged = $184,010
Loss on Disposal = Carrying value of old machine - Fair value of old machine
Loss on Disposal = (255,200 - Total Depreciation) - $102,490
Total depreciation = $127,600 - (51,040 * 3/12) = $140,360
Loss on Disposal = $255,200 - $140,360 - $102,490
Loss on Disposal = $12,350.
| Date | Accounts Details & Explanation | Debit | Credit |
| April 1 | Depreciation Expense | $12,760 | |
| Accumulated Depreciation | $12,760 | ||
| April 1 | Machinery (new) | $286,500 | |
| Accumulated Depreciation | $140,360 | ||
| Loss on disposal of machinery | $12,350 | ||
| Machinery (old) | $255,200 | ||
| Cash | $184,010 |
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