Question

General Journal of Smith Ltd – the two journal entries that have yet to be posted:
Date	General ledger account name affected by the transaction:	Dr	Cr
29/3/19	Dr Machinery	450 000
	Cr Loan payable		450 000
	( to record the purchase of machinery)
29/3/19	Dr Cash	50 000
	Dr Accumulated depreciation - machinery	470 400
	Dr Loss on sale	19 600
	Cr Machinery		540 000
	( to record the sale of an item of machinery)

                      A GENERALLEDGER (GL)contains ALL the individual asset, liability, equity, income and expense GL ACCOUNTS.

General Ledger of Smith Ltd:

Cash
			$			$
01/3/19	Opening balance	245,000		29/3/19	Accounts payable	220,200
29/3/19	Accounts receivable	300,980

                                                           

Machinery
			$			$
01/3/19	Opening balance	1,450,000

Accumulated depreciation - Machinery
			$			$
				01/3/19	Opening balance	680,000
				29/3/19	Depn expense	63,000
Loan payable
			$			$

Gain/Loss on sale of machinery
			$			$

The balances, of the above GL accounts, to be included in the SFP, as at 31/3/19, would be:

Answer 1

Cash is a current asset and has debit balance (Dr.).

Cash = Opening + Accounts receivable – Accounts payable – Machinery sold for cash

        = 245,000 + 300,980 – 220,020 – 50,000

        = $275,960 Dr. (Answer)

Machinery is a fixed asset and has debit balance (Dr.).

Machinery = Opening + Purchase of machinery – Sale of machinery

                 = 1,450,000 + 450,000 – 540,000

                 = $460,000 Dr. (Answer)

Accumulated depreciation is a contra of machinery account; therefore, it has credit balance (Cr.).

Accumulated depreciation = Opening + Depreciation expense – Machinery sold

                                           = 680,000 + 63,000 – 470,400

                                           = $272,600 Cr. (Answer)

Loan payable is a liability; therefore, it has credit balance (Cr.).

Loan payable = $450,000 Cr. (Answer)

There is loss in sale of machinery; therefore, it has debit balance (Dr.).

Gain/loss on sale of machinery = $19,600 Dr. (Answer)