Question

ABC Co. purchased a machine on April 1, 2014 for $82,000 with an estimated useful life of 6 years and salvage value of $4,000.  They sold the machine on July 1, 2019, for $15,000.  Assuming ABC Co. uses the straight line method of depreciating its assets, the journal entry to record the sale of the machine would include a:

	A.	Debit to Loss for $1,250
	B.	Credit to Machine for $13,750
	C.	Credit to Gain for $1,250
	D.	Credit to Accumulated Depreciation for $68,250
	E.	Debit to Cash $13,750

Answer 1

WORKING NOTES: 1
	CALCULATION OF DEPRECIATION EXPENSES FROM 2014 TO 2019
	Purchase Cost Of Machine	$                      82,000
	Less: Salvage Value	$                        4,000
	Net Value for Depreciation (A)	$                      78,000
	Life of the Equipment(B)	6.00	Years
	Deprecaiton per year =(A/B)	$                      13,000
	Purchase value of Machine (A)	$                      82,000
	Depreciation for year 2014 ($ 13,000 X 9 / 12 Months)	$                        9,750
	Depreciation for year 2015	$                      13,000
	Depreciation for year 2016	$                      13,000
	Depreciation for year 2017	$                      13,000
	Depreciation for year 2018	$                      13,000
	Depreciation for year 2019 ($ 13,000 X 6 / 12 Months)	$                        6,500
	Total Depreciation Charged (B)	$                      68,250
	Book Value of Equipment as on July 01, 2019 (A-B)	$                      13,750
WORKING NOTES: 2
	CALCULATION OF GAIN OR LOSS ON SALE OF MACHINE
	Sale Value of the Machine	$                      15,000
	Less: Book Value as on July 01, 2019	$                      13,750
	Gain on sale of Machine	$                        1,250
Solution:
Date	Account Title and explanation	Debit	Credit
Dec 31, 2019	Cash	$15,000
	Accumulated Depreciation - Machine	$68,250
	Machine		$82,000
	Gain on sale of Machine		$1,250
Answer = Option C = Credit to Gain for $ 1,250