Question

On January 1, 2017, Extensive Manufacturing purchased a machine for $580,000 that it expected to have a useful life of four years. The company estimated that the residual value of the machine was $100,000. Extensive Manufacturing used the machine for two years and sold it on January 1, 2019, for $320,000. As of December 31, 2018, the accumulated depreciation on the machine was $240,000. Read the requirements. 1. Calculate the gain or loss on the sale of the machinery Extensive Manufacturing will record a loss of $ 20,000 on the sale of the machinery. 2. Record the sale of the machine on January 1, 2019. (Record debits first, then credits. Exclude explanations from any journal entries.) Journal Entry Date Accounts Debit Credit 2019 Jan 1

Answer 1

Answer:

1) Computation of gain or loss on sale of machinery

Cost of Machinery(1)	$580000
Less: Accumulated Depreciation(2)	($240000)
WDV of Machinery (1-2)=(3)	$340000
Less: Sales Value of Machinery	($320000)
Loss on Sale of Machinery	($20000)

2) Journal Entry

Date	Accounts	Debit	Credit
2019 Jan 1	Cash Account	$320000
	Loss on Sale of Machinery	$20000
	Accumulated Depreciation	$240000
	Machinery Account		$580000

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