Question

Ly Company disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following:

Asset	Original Cost			Residual Value			Estimated Life		Accumulated Depreciation (straight-line)
Machine A	$	32,000		$	3,200		5	years	$	23,040	(4 years)
Machine B		61,200			3,100		14	years		45,650	(11 years)

The machines were disposed of in the following ways:

1. Machine A: Sold on January 1 for $9,500 cash.
2. Machine B: On January 1, this machine was sold to a salvage company at zero proceeds (and zero cost of removal).

Required:

1. 1. & 2. Prepare the journal entries related to the disposal of Machine A and B at the beginning of the current year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

1.

Cost of machine A = $32,000

Accumulated depreciation = $23,040

Book value of machine A = Cost of machine-Accumulated depreciation

= 32,000-23,040

= $8,960

Sale price of machine A = $9,500

Gain on sale of machine A = Sale price of machine A - Book value of machine A

= 9,500-8,960

= $540

General Journal	Debit	Credit
Cash	$9,500
Accumulated depreciation- Machine	$23,040
Gain on sale of machine		$540
Machine A		$32,000

2.

Cost of machine B = $61,200

Accumulated depreciation = $45,650

Book value of machine B = Cost of machine-Accumulated depreciation

= 61,200-45,650

= $15,550

Sale price of machine B = $0

Loss on sale of machine B=  Book value of machine B- Sale price of machine B

=15,550-0

= $15,550

General Journal	Debit	Credit
Accumulated depreciation- Machine	$45,650
Loss on sale of machine	$15,550
Machine B		$61,200

Kindly comment if you need further assistance.

Thanks‼!