Ly Company disposed of two dif
Ly Company disposed of two different assets. On January 1, priorto their disposal, the accounts reflected the following:
| Asset | Original Cost | Residual Value | Estimated Life | Accumulated Depreciation (straight-line) | |||||||
| Machine A | $ | 32,000 | $ | 3,200 | 5 | years | $ | 23,040 | (4 years) | ||
| Machine B | 61,200 | 3,100 | 14 | years | 45,650 | (11 years) | |||||
The machines were disposed of in the following ways:
- Machine A: Sold on January 1 for $9,500 cash.
- Machine B: On January 1, this machine was sold to a salvagecompany at zero proceeds (and zero cost of removal).
Required:
-
1. & 2. Prepare the journal entries relatedto the disposal of Machine A and B at the beginning of the currentyear. (If no entry is required for a transaction/event,select “No Journal Entry Required” in the first accountfield.)
Answer:
1.
Cost of machine A = $32,000
Accumulated depreciation = $23,040
Book value of machine A = Cost of machine-Accumulateddepreciation
= 32,000-23,040
= $8,960
Sale price of machine A = $9,500
Gain on sale of machine A = Sale price of machine A – Book valueof machine A
= 9,500-8,960
= $540
| GeneralJournal | Debit | Credit |
| Cash | $9,500 | |
| Accumulated depreciation- Machine | $23,040 | |
| Gain on sale of machine | $540 | |
| Machine A | $32,000 |
2.
Cost of machine B = $61,200
Accumulated depreciation = $45,650
Book value of machine B = Cost of machine-Accumulateddepreciation
= 61,200-45,650
= $15,550
Sale price of machine B = $0
Loss on sale of machine B= Book value of machine B-Sale price of machine B
=15,550-0
= $15,550
| GeneralJournal | Debit | Credit |
| Accumulated depreciation- Machine | $45,650 | |
| Loss on sale of machine | $15,550 | |
| Machine B | $61,200 |
Kindly comment if you need furtherassistance.
Thanks‼!
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