Question

Diaz Company owns a machine that cost $126,900 and has accumulated depreciation of $94,000. Prepare the entry to record the disposal of the machine on January 1 in each seperate situation. 1. The machine needed extensive repairs and was not worth repairing. Diaz disposed of the machine, receiving nothing in return. 2. Diaz sold the machine for $16,000 cash. 3. Diaz sold the machine for $32,900 cash. 4. Diaz sold the machine for $41,000 cash. View transaction list Journal entry worksheet 2 3 4 Record the disposal of the machine receiving nothing in return. Note: Enter debits before credits. Date General Journal Debit Credit Jan 01 Record entry Clear entry View general journal

Answer 1

If sale value is lesser than book value of machine, it results in loss. If sale value is higher than book value of machine, it results in profit i.e. case 4.

Cost of machine Less: Accumulated depreciation Book value of machine Sale value (Profit) / Loss $ $ $ $ $ Case 1 126,900 94,000 32,900 - 32,900 $ $ $ $ $ Case 2 126,900 $ 94,000 $ 32,900 $ 16,000$ 16,900 $ Case 3 126,900 94,000 32,900 32,900 - $ $ $ $ $ Case 4 126,900 94,000 32,900 41,000 (8,100) Credit Date Account Titles and Explanation 01-Jan Accumulated Depreciation Loss on sale of machine Machine $ $ Debit 94,000 32,900 $ 126,900 01-Jan Cash Accumulated Depreciation Loss on sale of machine Machine $ $ $ 16,000 94,000 16,900 $ 126,900 01-Jan Cash Accumulated Depreciation Machine $ $ 32,900 94,000 $ 126,900 $ $ 41,000 94,000 01-Jan Cash Accumulated Depreciation Machine Profit on sale of machine $ $ 126,900 8,100