Question

Ly Company disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following Accumulated Depreciation (straight-line) $ 28,240 (4 years) Original Residual Estimated Life Asset Value Cost Machine $ 40,000 $4,700 5 years A Machine 12 years 53,100 (9 years) 5, 400 76,200 The machines were disposed of in the following ways: a. Machine A: Sold on January 1 for $12,000 cash b. Machine B: On January 1, this machine was sold to a salvage company at zero proceeds (and zero cost of removal). Required: 1.& 2 Prepare the journal entries related to the disposal of Machine A and B at the beginning of the current year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 1 2 4 Record the current year depreciation for Machine A prior to disposal. Note: Enter debits before credits Date General Journal Debit Credit January 01 Record entry Clear entry View general journal

Answer 1

1 Sr. No. Date General Journal Debit Credit Remarks We do not need to pass any journal entry on the 1st of January as depreciation has been recorded till 31 st of Dec last year. Closing balance of asset as on 31st Dec is the Opening balance as on 1st Jan. All sale transactions are made on 1st Jan, hence no further depreciation is required to be recorded. 1 January 01 No Journal Entry Required 3 2 January 01 Cash 12,000.00 To Machine A This is the value of the sale transaction This is the written down value of Machine A as on 1st January. That will be Cost less Accumulated Depreciation, i.e. 11,760.00 40000-28240 = 11760 Since sale value is higher than the book written down value of the asset, we have made a profit on sale of asset. Calculation of profit is Sale value less written down value, i.e. 240.00 12000-11760= 240 To Profit on sale of Asset 7 We do not need to pass any journal entry on the 1st of January as depreciation has been recorded till 31 st of Dec last year. Closing balance of asset as on 31st Dec is the Opening balance as on 1st Jan. All sale transactions are made on 1st Jan, hence no further depreciation is required to be recorded. 3 January 01 No Journal Entry Required 9 10 4 January 01 Loss on sale of Asset 23,100.00 Since the sale value is zero, we have not received anything on disposal of this machine, hence the entire written down value or the book value as on 1st Jan is a loss to us and we have recorded the loss in this entry This is the written down value of Machine B as on 1st January. That will be Cost less Accumulated Depreciation, i.e. 23,100.00 76200-53100=23100 To Machine B 12