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Brief Exercise 10-15 PPE disposal Stellar Corporation owns machinery that cost $28,400 when purchased on July...
Brief Exercise 10-15 PPE disposal
Stellar Corporation owns machinery that cost $28,400 when
purchased on July 1, 2014. Depreciation has been recorded at a rate
of $3,408 per year. The machinery is sold on September 30, 2019 for
$7,384.
Prepare journal entries to (a) update depreciation for 2018 and (b) record the sale.
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Date |
Account |
Debit |
Credit |
|
|
Solutions
Expert Solution
Depreciation for 2018
31-Dec2018 Depreciation A/c Dr, 3408
To machinery 3408
Sale of asset
30-Sept-2019 Cash A/c Dr, 7384
Profit & Loss A/c Dr, 3124
To machinery 10508
Working note
Calculation of loss on sale of asset and book value at the time of sale.
Boook value at Sept- 30-2019 = Purchase price - Accimulated depreciation
Depreciation for each year
2014 =[3408 
12] 
6*= 1704 *Asset is used only for 6 months [July, Aug,
Sept, Oct, Nov, Dec]
2015 = 3408
2016 = 3408
2017 = 3408
2018 = 3408
2019 =[3408
12]
9* = 2556 *Asset is used only for 9
months [Jan, Feb, Mar, Apr, May, June, July,
Aug, Sept]
Total 17892
Accumulated depreciation = 17892
Book value = 28400 - 17892 = 10508
Loss on sale of machinery = Book value - Sales proceeds- = 10508 - 7384 = 3124
At the date of sale machinery account is credited for 10508 because the remaining book value of the machinery is 10508.
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Date
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