Question

Winningham Company sold the following two machines in 2019:

Machine A Machine B
Cost $ 92,000 $ 43,000
Purchase date July 1, 2015 Jan. 1, 2016
Useful life 8 years 8 years
Residual value $ 4,000 $ 3,000
Depreciation method Straight-line Double diminishing-balance
Date sold July 1, 2019 Aug. 1, 2019
Sales price (Cash) $ 37,000 $ 12,000

Instructions:

Journalize all entries required to update depreciation and record the sales of the two assets in 2019.

NOTE: The company has recorded depreciation on the machines up to December 31, 2018.

Answer 1

Depreciation per year on Machine A =($92,000-$4,000) / 8 Years =$11,000
Depreciation for 2019 on Machine A =$11,000*6/12 =$5,500
Date	Account explanation	Debit	Credit
June 30,2019	Depreciation expenses	$5,500
	Accumulated Depreciation-Machine		$5,500
	(to depreciation recorded for 6 months on Machine A)
July 1,2019	Cash	$37,000
	Accumulated Depreciation-Machine	$44,000
	Loss on sale of Machine A	$11,000
	Machine - A		$92,000
	(to Machine A sold at loss recorded)
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
At Acquistion	$43,000					$43,000
2016		$43,000	25.00%	$10,750	$10,750	$32,250
2017		$32,250	25.00%	$8,063	$18,813	$24,188
2018		$24,188	25.00%	$6,048	$24,860	$18,140
Total Accumulated Depreciation as on Dec 31,2018 =$24,860
Book Value as on Dec 31,2018 =$18,140
Depreciation for 7 months on Machine B =$18,140*25%*7/12 =$2,645
Date	Account explanation	Debit	Credit
July 31,2019	Depreciation expenses	$2,645
	Accumulated Depreciation-Machine		$2,645
	(to depreciation recorded for 7 months on Machine B)
Aug 1,2019	Cash	$12,000
	Accumulated Depreciation-Machine	$27,505
	Loss on sale of Machine B	$3,495
	Machine - B		$43,000
	(to Machine B sold at loss recorded)