Question

Diaz Company owns a milling machine that cost $125,500 and has accumulated depreciation of $93,000. Prepare the entry to record the disposal of the milling machine on January 3 in each of the following independent situations.

The machine needed extensive repairs, and it was not worth repairing. Diaz disposed of the machine, receiving nothing in return.

Diaz sold the machine for $15,700 cash.

Diaz sold the machine for $32,500 cash.

Diaz sold the machine for $41,900 cash.

Answer 1

Situation 1

The machine needed extensive repairs, and it was not worth repairing. Diaz disposed of the machine, receiving nothing in return.

Disposal of Asset at nothing received in return
Date	General Journal	Debit	Credit
3-Jan	Depreciation expense-Machine	$    32,500.00
	Accumulated depreciation-Machine		$    32,500.00
	(Recording depreciation for reduced value in machine)
3-Jan	Accumulated depreciation-Machine	$ 125,500.00
	Machine		$ 125,500.00
	(Disposal of Machine)

Alternatively Asset amortization expense could be used instead of depreciation expense

Situation 2

Diaz sold the machine for $15,700 cash.

Disposal of Machine
Date	General Journal	Debit	Credit
3-Jan	Cash	$    15,700.00
	Accumulated depreciation-Machine	$    93,000.00
	Loss on Disposal of machine	$    16,800.00
	Machine		$ 125,500.00

Machine is sold at loss

Situation 3

Diaz sold the machine for $32,500 cash.

Disposal of Machine
Date	General Journal	Debit	Credit
3-Jan	Cash	$    32,500.00
	Accumulated depreciation-Machine	$    93,000.00
	Machine		$ 125,500.00
	(Machine sold)

In this situation there is no profit nor any loss.

Situation 4

Diaz sold the machine for $41,900 cash.

Disposal of Machine
Date	General Journal	Debit	Credit
3-Jan	Cash	$    41,900.00
	Accumulated depreciation-Machine	$    93,000.00
	Profit on disposal of Machine		$      9,400.00
	Machine		$ 125,500.00
	(Machine sold)

Machine is sold at a profit.

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