Question

Exercise 10-16 Disposal of assets LO P2 Diaz Company owns a milling machine that cost $126,200 and has accumulated depreciation of $90,300. Prepare the entry to record the disposal of the milling machine on January 3 under each of the following independent situations. 1. The machine needed extensive repairs, and it was not worth repairing Diaz disposed of the machine, receiving nothing in return 2 Diaz sold the machine for $16,300 cash. 3. Diaz sold the machine for $35.900 cash. 4. Diaz sold the machine for $40,500 cash. View transaction list Journal entry worksheet < 1 2 3 4 Record the disposal of the machine receiving nothing in return.

Answer 1

First question is being answered here.

Net book value of the machine = Cost - Accumulated Depreciation

Net book value of the machine = $126200 - $90300 = $35900

1. Machine receiving nothing in return:

Sale proceeds = $0

Loss on disposal = Sale proceeds - Net book value

Loss on disposal = $0 - $35900 = - $35900

Required journal entry is:

Date	General Journal	Debit	Credit
1	Loss on disposal	35900
	Accumulated depreciation	90300
	Machine		126200
	(for disposal of machine receiving nothing in return)

2. Sold machine for $16300 cash:

Sale proceeds = $16300

Loss on disposal = Sale proceeds - Net book value

Loss on disposal = $16300 - $35900 = - $19600

Required journal entry is:

Date	General Journal	Debit	Credit
2	Accumulated depreciation	90300
	Loss on disposal	19600
	Cash	16300
	Machine		126200
	(for sale of machine)

3. Sold machine for $35900 cash:

Sale proceeds = $35900

Loss on disposal = Sale proceeds - Net book value

Loss on disposal = $35900 - $35900 = $0

Required journal entry is:

Date	General Journal	Debit	Credit
3	Cash	35900
	Accumulated depreciation	90300
	Machine		126200
	(for machine sold)

4. Sold machine for $40500 cash:

Sale proceeds = $40500

Loss / Gain on disposal = Sale proceeds - Net book value

Loss / Gain on disposal = $40500 - $35900 = $4600 (gain)

Required journal entry is:

Date	General Journal	Debit	Credit
4	Cash	40500
	Accumulated depreciation	90300
	Machine		126200
	Gain on sale		4600
	(for machine sold and gain recognized)