Rayya Co. purchases a machine for $100,800 on January 1, 2020.Straight-line depreciation is taken each...

Rayya Co. purchases a machine for $100,800 on January 1, 2020. Straight-line depreciation is taken each year for four years assuming a eight-year life and no salvage value. The machine is sold on July 1, 2024, during its fifth year of service. Prepare entries to record the partial year’s depreciation on July 1, 2024, and to record the sale under each separate situation. (1) The machine is sold for $50,400 cash. (2) The machine is sold for $42,336 cash.

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Answer

Journal Entry to record partial year's depreciation on July 1, 2024 :

Date	Accounts Titles & Explaination	Debit	Credit
July 1, 2024	Depreciation expense	6300
	Accumulated depreciation - Machinery		6300
	(Being entry recorded for depreciation)

Working note:

Annual depreciation = Cost of assets - salvage value of assets / no. of useful life (years)

= 100800 - 0 / 8 years

= 12600

Partial depreciation on July 1, 2024 = 12600 *6 months / 12 months

= 6300

Journal entry to record the sale:

	Date	Accounts Titles & Explaination	Debit	Credit
1	July 1, 2024	Cash	50400
		Accumulated depreciation - Machinery	56700
		Gain on sale of machinery		6300
		Machinery		100800
		(being entry recorded for sale)

2	July 1, 2024	Cash	42336
		Accumulated depreciation - Machinery	56700
		Loss on sale of machinery	1764
		Machinery		100800
		(being entry recorded for sale)

Working note:

Accumulated depreciation calculation for 4.5 years (Jan1,2020 to July 1,2024)

Accumulated dep. = Cost of assets - salvage value of assets / useful life (years) *4.5 years

= 100800 - 0 / 8 * (4.5)

ekkarill92 answered 2 years ago

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