Exercise 7-48 (Algorithmic) Sale of Plant Asset Pacifica Manufacturing retired a

Question

Exercise 7-48 (Algorithmic)
Sale of Plant Asset

Pacifica Manufacturing retired a computerized metal stamping machine on December 31, 2011. Pacifica sold the machine to another company and did not replace it. The following data are available for the machine:

The machine was sold for $181,000 cash. Pacifica uses the straight-line method of depreciation.

1. Prepare the journal entry to record depreciation expense for 2011.

2011 Dec. 31

  

  

  

  

Record depreciation expense

2. Compute accumulated depreciation at December 31, 2011.

$  

3. Prepare the journal entry to record the sale of the machine. If no entry required, leave the answer boxes blank.

2011 Dec. 31

  

  

  

  

  

  

  

  

  

  

  

  

Record sale of machine

Cost (installed), 1/1/2006 $920,000 Residual value estimated on 1/1/2006 160,000 Estimate life as of 1/1/2006 8 years

Explanation / Answer

Cost of Machine 920000 Less: Residual value 160000 Depreciable amount 760000 Divide: Life 8 Annual depreciatiion 95000 Journal entry for depreciation of 2011 Dec31 2011 Depreciation expense Account Dr. 95000      Accumulated depreciation Account 95000 Accumulated depreciation of Dec 31 2011: Annual depreciation 95000 Number of years of usage of assets 6 years Total accumulated depreciation 570000 Journal entry for sale of Assets: Dec312011 Cash account Dr. 181000 Accumulated depreciation Account dr. 570000 Loss on sale of Machine Account Dr. 169000       Machine Account 920000

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