Question

Skysong Corporation owns machinery that cost $23,200 when purchased on July 1, 2014. Depreciation has been recorded at a rate of $2,784 per year, resulting in a balance in accumulated depreciation of $9,744 at December 31, 2017. The machinery is sold on September 1, 2018, for $12,180. Prepare journal entries to (a) update depreciation for 2018 and (b) record the sale.

Answer 1

• Journal Entries require following working

A	Annual Depreciation	$             2,784.00
B = A x 8months/12months	Depreciation for 2018 till 31 Aug	$             1,856.00
C = A+B	Total Accumulated Depreciation at the time of sale	$             4,640.00
D = 23200 - C	Book Value at time of sale	$           18,560.00
E	Sold for	$           12,180.00
F = D - E	Loss on Sale	$             6,380.00

• Journal entries

Date	Accounts title	Debit	Credit
a' 1 Sept 2018	Depreciation Expenses	$             1,856.00
	Accumulated Depreciation		$            1,856.00
	(Depreciation updated)
b' 1 Sept 2018	Cash	$           12,180.00
	Accumulated Depreciation	$             4,640.00
	Loss on Sale	$             6,380.00
	Equipment - Machinery		$          23,200.00