Question
In: Accounting
During 2017, Ly Company disposed of two different assets. On January 1, 2017, prior to disposal...
During 2017, Ly Company disposed of two different assets. On
January 1, 2017, prior to disposal of the assets, the accounts
reflected the following:
| Asset | Original Cost |
Residual Value |
Estimated Life |
Accumulated Depreciation (straight-line) |
||||||
| Machine A | $ | 36,000 | $ | 3,900 | 6 years | $ | 26,750 | (5 years) | ||
| Machine B | 68,500 | 4,150 | 13 years | 54,450 | (11 years) | |||||
The machines were disposed of in the following ways:
- Machine A: This machine was sold on January 1, 2017, for $8,220 cash.
- Machine B: On January 1, 2017, this machine suffered irreparable damage from an accident and was removed immediately by a salvage company at no cost.
Required:
1. Prepare the journal entries related to the disposal of
each machine at the beginning of 2017. Transaction “a” relates to
the recording of the 2017 depreciation and transaction “b” relates
to the recording of the disposal of the machine. (If no
entry is required for a transaction/event, select "No journal entry
required" in the first account field.)
Machine A - Jan. 1, 2017:
Machine B - January 1, 2017:
2. Not available in Connect.
Solutions
Expert Solution
1.
| Date | General Journal | Debit | Credit |
| 1 Jan 2017 | Cash | 8220 | |
| Accumulated Depreciation - Machine A | 26750 | ||
| Loss on Sale of Machine A | 1030 | ||
| Machine A | 36000 | ||
| ( To record Sale of Machine A ) |
| Date | General Journal | Debit | Credit |
| 1 Jan 2017 | Accumulated Depreciation - Machine B | 54450 | |
| Loss on Disposal of Machine B | 14050 | ||
| Machine B | 68500 | ||
| ( To record Disposal of Machine B ) |
Note:
In both the assets case, Machines are sold or disposed in the beginning of the year , hence no depreciation provided . hence no journal entry required.
Loss on Sale of Machine A
| Cost of Machine A | 36000 |
| Less: Accumulated Depreciation | 26750 |
| Book Value of Machine A | 9250 |
| Less: Sale Value of Machine A | 8220 |
| Loss on Sale of Machine A | 1030 |
Loss on Disposal of Machine B
| Cost of Machine B | 68500 |
| Less: Accumulated Depreciation | 54450 |
| Loss on Disposal of Machine B | 14050 |
Using straight-line depreciation method = (Cost - Residual Value) / Useful life:
Machine A = ($36,000 - $3,900) / 6 years = $5350/year
$5350/year x 5 years = $26750
Machine B = ($68500 - $4150) / 13 years = $4950/year
$4950/year x 11 years = $ 54450
ekkarill92 answered 2 years agoRelated Solutions
Ly Company disposed of two different assets. On January 1, prior to their disposal, the accounts...
Ly Company disposed of two different assets. On January 1, prior
to their disposal, the accounts reflected the following:
Asset
Original Cost
Residual Value
Estimated Life
Accumulated Depreciation (straight-line)
Machine A
$
32,000
$
3,200
5
years
$
23,040
(4 years)
Machine B
61,200
3,100
14
years
45,650
(11 years)
The machines were disposed of in the following ways:
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Asset
Original
Cost
Residual
Value
Estimated
Life
Accumulated
Depreciation
(straight line)
Machine A
$
21,000
$
3,000
8 years
$
15,750 (7
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4,000
10 years
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Cost
Residual
Value
Estimated
Life
Accumulated
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(straight line)
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$
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$
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10 years
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