On January 1, 2016, Horton Inc. sells a machine for $22,100. The machine was ori

Question

On January 1, 2016, Horton Inc. sells a machine for $22,100. The machine was originally purchased on January 1, 2014 for $45,000. The machine was estimated to have a useful life of 5 years and no residual value. Horton uses straight-line depreciation. a. Prepare the journal entry to record the sale. (If no entry is required for a transaction/event, select No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the entry for sale of equipment. Note: Enter debits before credits. ransaction General Journal Debit Credit Record entry Clear entry View general journal Type here to search

Explanation / Answer

Answer:

The accumulated depreciation of the machine = Depreciation of 2 years as per the straight line method

= Original Value - Residual Value / Useful Life * 2

= 45,000 - 0 /5 *2

= $18,000

Loss(Profit) on sale of Machine = Original Cost - Accumulated Depreciation - Sale Value

= 45,000 - 18,000 - 22,100

= $4,900

Journal Entries Transaction General Journal Debit $ Credit $ (a) Cash      22,100 Accumulated Depreciation      18,000 Loss on sale of Machine        4,900 Machine      45,000 (Machine sold for $21,100 for a loss of $4,900)

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