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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.

Date	Account	Debit	Credit

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.

ekkarill92 answered 1 year ago

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