In: Accounting
A company owns a production machine that cost $5,000 with a salvage
value of zero. The machine was just sold for $1,100. Accumulated
depreciation has just been updated and accurately reflects an amount
of $4,000. In good order and form record the necessary General Journal
entry to dispose of the machine
Book value of the asset = Cost of asset – accumulated depreciation
= 5000 – 4000
= 1000
The asset was sold for 1100, which is higher than the asset book value, so there is a gain on sale of asset.
Gain on sale = 1100 – 1000 = 100
Cash Dr |
1,100 |
|
Accumulated depreciation Dr |
4,000 |
|
Gain on asset disposal Cr |
100 |
|
Machine asset Cr |
5,000 |
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