Question

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On January 1, 2017, Exclusive Manufacturing purchased a machine for $860,000 that it expected to have a useful life of four years. The company estimated that the residual value of the machine was $100,000. Exclusive Manufacturing used the machine for two years and sold it on January 1, 2019, for $150,000. As of December 31, 2018, the accumulated depreciation on the machine was $380,000. Read the requirements. i Requirements nery 1. Calculate the gain or loss on the sale of the machinery 2. Record the sale of the machine on January 1, 2019. Print Done

Answer 1

Date of Purchase Cost of Machinery Residual Value Life of Asset $ $ 01-01-2017 8,60,000 1,00,000 4 years Depreciation = Cost of Asset - Residual Value Life of Asset $860000 - $100000 = $ 1,90,000 Therefore Depreciation of 2017 Depreciation of 2018 Accumulated Depreciation $ $ 1,90,000 1,90,000 $ 3,80,000 Value of Machinery on 1st Jan,2019 = Cost - Accumulated Dep = $8,60,000 - $3,80,000 = $ 4,80,000 Solution 1 Gain or Loss on Sale of Machinery Value of Machinery on 1st Jan,2019 = $ 4,80,000 Proceed from Sale of Machinery = $ 1,50,000 Loss on Sale of Machiney $ 3,30,000 Credit Solution 2 Journal Entries in Books of Exclusive Manufacturing Date Description Post Ref. Debit 01-01-2019 Bank $ 1,50,000.00 Loss on sale of Machinery $3,30,000.00 Accumulated Depreciation $3,80,000.00 Machine Account (To record the sale of Machine) $8,60,000.00

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