Question 1 5 pts In order to enhance the business\' efficiency, an old machine w

Question

Question 1 5 pts In order to enhance the business' efficiency, an old machine was traded in for a newer model. The old machine had cost $140,500 and accumulated depreciation as at trade-in date amounted to $102,000. The market value of the new model is $208,000 and a trade- in allowance of $30,000 was granted on the old machine. Any outstanding balance was paid in cash. The journal entry to record the transaction is: Dr Machine (New) $208,000. Dr Accumulated Depreciation $102,000. Cr Cash $169,500. Cr Machine (Old) $140,500 o Dr Machine (Old) $140,500. Dr Cash $178,000. Cr Accumulated Depreciation $102,000. Cr Machine (New) $208,000. Cr Gain on disposal $8,500. Dr Accumulated Depreciation $102,000. Dr Machine (New) $178,000. Cr Machine (Old) $140,500. Cr Cash $139,500. Dr Accumulated Depreciation $102.000. Dr Machine (New) $208,000. Dr Loss on disposal $8,500. Cr Machine (Old) $140,500. Cr Cash $178,000.

Explanation / Answer

Calculation of loss on sale of old machine

A)Cost of old machine. 140500

B) Accumulated depreciation 102000

C)Sale price of old machine 30000

D) Loss on exchange of machine(A-B-C) 8500

E)Market value of new model . 208000

F)Allowance for old machine. 30000

G)cash payable(E-F) . 178000

Journal entry for exchange would be

Dr. Accumulated depreciation. 102000

Dr.New machine. 208000

Dr.loss on disposal . 8500

Cr.Machine old. 140500

Cr.Cash . 178000

(Being old machine exchanged with new machine by paying cash of $178000)

Hence option d(last) is correct.

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