During 2015, Merkley Company disposed of three different assets. On January 1, 2

Question

During 2015, Merkley Company disposed of three different assets. On January 1, 2015, prior to their disposal, the accounts reflected the following:

During 2015, Merkley Company disposed of three different assets. On January 1, 2015, prior to their disposal, the accounts reflected the following:

Accumulated (straight line) 33,750 (6 years) Original Residual Estimated CostValue Life Asset Machine A 39,000 $3,000 8years S 27000 (6 years) Machine B 49,000 4,000 8 years Machine C 75,700 5,300 16 years 52,800 (12 years) The machlnes were disposed of In the following ways: a. b. Machine A: Sold on January 1, 2015, for $11,700 cash. Machine B: Sold on December 31, 2015, for $10,325, recelved cash, $2,200, and a $8125 Interest-bearing (12 percent) note recelvable due at the end of 12 months. C.Machine C: On January 1, 2015, this machine suffered irreparable damage from an accident. On January 10, 2015, a salvage company removed the machine at no cost.

Explanation / Answer

Date Account title and explanation Debit Credit a No entry as disposed on 1st January Cash 11700 Accumulated Depreciation - Machine A 27000 Loss on Disposal of Machine 300 Machine A 39000 (To record disposal of Machine A) b Depreciation expense 5625 Accumulated Depreciation - Machine B 5625 (To record depreciation) Cash 2200 Note Receivable 8125 Accumulated Depreciation - Machine B 39375 Gain on Disposal of Machine 700 Machine B 49000 (To record disposal of Machine B) C No Depreciation as scrapped on first day Accumulated Depreciation - Machine C 52800 Loss on Disposal of Machine 22900 Machine C 75700 (To record scrap)

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