PB9-2 Recording and Interpreting the Disposal of Long-Lived Assets [LO 9-5] Duri
ID: 2529757 • Letter: P
Question
PB9-2 Recording and Interpreting the Disposal of Long-Lived Assets [LO 9-5] During the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following Original Residual Estimated Depreciation (straight-line) Cost Value Life 7 years 5 years Asset $22.000 (4 years) Machine A $52,000 $13,500 2,900 7,980 (3 years) Machine B 16,200 The machines were disposed of in the following ways: a. b. Machine A: Sold on January 2, for $35,500 cash. 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 transaction/event, select "No Journal Entry Required" in the first account field.Explanation / Answer
Machine A
Date Journal Entry Dr. Cr.
Jan1 Depreciation Expense A/c 5500
To Accumulated Depreciation A/c 5000
[Depreciation for current year being transferred to
Accumulated depreciation A/c] (W1)
Jan2 Disposal A/c 52000
To Machine A A/c 52000
(Cost of machine being transferred to
Disposal A/c)
Jan2 Accumulated Depreciation A/c 22000
To Disposal A/c 22000
(Accumulated Depreciation for 4 years Being transferred to
Disposal A/c)
Jan2 Cash A/c 35500
To Disposal A/c 35500
[Cash A/c being debited after machine was sold (disposal)]
Combined Entry (W2)
Dr. Cr.
Cash A/c 35500
Accumulated Depreciation 22000
Gain on Disposal 5500
Machine A A/c 52000
(W1) Depreciation charged on Machine A (straight line)
(Cost - Residual Value) / Useful life
= (52000-13500) / 7
= 5500 ( for 1 year)
W2) Disposal A/c
Machine B
Date Journal Entry Dr. $ Cr.
Jan1 Depreciation Expense A/c 2660
To Accumulated Depreciation A/c 2660
[Depreciation for current year being transferred to
Accumulated depreciation A/c] (W3)
Jan2 Disposal A/c 16200
To Machine A A/c 16200
(Cost of machine being transferred to
Disposal A/c)
Jan2 Accumulated Depreciation A/c 7980
To Disposal A/c 7980
(Accumulated Depreciation for 3 years Being transferred to
Disposal A/c)
Jan2 No Journal Entry Required
(No cash received for disposal of Machine B)
Combined Entry (W4)
Dr. Cr.
Accumulated Depreciation 7980
Gain on Disposal 8220
Machine B A/c 16200
(W3) Depreciation charged on Machine B (straight line)
(Cost - Residual Value) / Useful life
= (16200-2900) / 5
= 2660 ( for 1 year)
(W4) Disposal A/c
Dr. Cr. Original Cost 52000 Accumulated Depreciation 22000 Profit on Sale A/c 5500 Cash A/c 35500 _________ ________ 57500 57500Related Questions
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