During the current year, Rayon Corporation disposed of two different assets. On

Question

During the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following Original Cost Machine A $69,000 $12,000 Accumulated Depreciation (straight-line) Estimated Residual Value Life 9 years 7 years Asset $38,000 (6 years) Machine B 15,100 2,500 9,000 (5 years) The machines were disposed of in the following ways a. Machine A: Sold on January 2, for $34,400 cash b. Machine B: On January 2, this machine suffered irreparable damage from an accident and was removed immediately by a salvage company at no cost Required: 1&2. Give the journal entries related to the disposal of Machine A and Machine B on January 2 of the current year. (If no entry is required for a transactionlevent, select "No Journal Entry Required" in the first account field.)

Explanation / Answer

The following are the journal entries:

date accounts debit credit jan 2 No entry for depreciation of machine A Jan 2 Cash a/c $34,400 Accumulated depreciation - equipment a/c $38,000 .............To Equipment a/c $69,000 ............To Gain on disposal a/c $3,400 (gain = sale value - (original cost - accumulated depreciation))=>(34,400 - (69,000-38,000)) Jan 2 No journal entry for depreciation on machine B. jan 2 Accumulated depreciation - equipment a/c 9,000 Loss on disposal a/c 6,100 ..........To Equipment a/c 15,100 (loss on disposal = original cost - accumulated depreciation)=>(15,100 - 9,000)=>6,100)

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