Question

Diaz Company owns a milling machine that cost $125,200 and has accumulated depreciation of $91,900. 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 $17,200 cash.
3. Diaz sold the machine for $33,300 cash.
4. Diaz sold the machine for $41,000 cash.

Answer 1

Answer:

Cost of Equipment = $125,200

Accumulated Depreciation = $91,900

Book Value on the date of sale = $125,200 - $91,900 = $33,300

Situation 1. Diaz sold the machine for $17,200 cash:

Sale Proceeds = $17,200

Gain/ (Loss) on disposal = Sale Proceeds - Book Value on date of sale

Gain/(Loss) on disposal = $17,200 - $33,300 = -$16,200

General Journal	Debit	Credit
Cash	17,200
Accumulated Depreciation - Equipment	91,900
Loss on disposal of Equipment	16,100
Equipment		125,200

Situation 2. Diaz sold the machine for $33,300 cash:

General Journal	Debit	Credit
Cash	33,300
Accumulated Depreciation - Equipment	91,900
Equipment		125,200

Situation 3. Diaz sold the machine for $41,000 cash:

Sale Proceeds = $41,000

Gain/ (Loss) on disposal = Sale Proceeds - Book Value on the date of sale

Gain/(Loss) on disposal = $41,000 - $33,300 = $7,700

General Journal	Debit	Credit
Cash	41,000
Accumulated Depreciation - Equipment	91,900
Equipment		125,200
Gain on disposal of Equipment		7,700