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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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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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