A company purchased and installed machinery on January 1 at a total cost of $93,

Question

A company purchased and installed machinery on January 1 at a total cost of $93,000. Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value. The machinery was disposed of on July 1 of year four. The company uses the calendar year

. 1 Prepare the general journal entry to update depreciation to July 1 in year (Assume depreciation has already been recorded for the first 3 years.)

2. Prepare the general journal entry to record the sale of the machine for $27,000 cash.

Explanation / Answer

Answer:

JOURNAL ENTRY :

DATE

ACCOUNTS & EXPLANATION

DEBIT

CREDIT

1

DEPRECIATION A/C (93000/5)*6/12

9300

      ACCUMLATED DEPRECIATION A/C

9300

( TO RECORD DEPRECIATION UPDATED)

2)

CASH A/C

27000

ACCUMLATED DEPRECIATION A/C (18600*3+9300)

65100

LOSS ON SALE OF MACHINARY A/C

900

       MACHINARY A/C

93000

( TO RECORD SALE OF MACHINE)

DATE

ACCOUNTS & EXPLANATION

DEBIT

CREDIT

1

DEPRECIATION A/C (93000/5)*6/12

9300

      ACCUMLATED DEPRECIATION A/C

9300

( TO RECORD DEPRECIATION UPDATED)

2)

CASH A/C

27000

ACCUMLATED DEPRECIATION A/C (18600*3+9300)

65100

LOSS ON SALE OF MACHINARY A/C

900

       MACHINARY A/C

93000

( TO RECORD SALE OF MACHINE)

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