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

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 ago

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