Prepare journal entries . Kevin and Gloria got together with the documentation a

Question

Prepare journal entries .

Kevin and Gloria got together with the documentation and began to review the long-term asset activities. On January 15, 20x7, the company disposed of a stamping machine. The machine was originally purchased on January 15, 20x0 for $84,000. The machine was estimated to have a useful life of 10 years with a zero salvage value. (Note: Gray & Greene use a straight-line method of depreciation for all long-term assets unless otherwise noted.) No effort was made to sell or trade the machine because the machine was broken beyond repair. $100 was also paid to a salvage company to disassemble and remove the machine from the plant.

Explanation / Answer

Dep using SLN = (Cost-salvage)/Life = 84000/10 = 8400 per year

So from 20x0 to 20x7, ie 7 Yrs. Accum dep = 7*8400 = 58800

So book value = Cost - Accum Dep = 84000-58800 = 25200

So Loss on Disposal = 25200

Jourmnl entry is

15Jan 20x7 Accum Dep Cr 58800

Loss on Sale Cr 25200

Disposal exp Dr 100

Machine A/C Cr 84000

Cash Cr 100

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