CP9-2 Recording and Interpreting the Disposal of Long-Lived Assets [LO 9-5] Duri

Question

CP9-2 Recording and Interpreting the Disposal of Long-Lived Assets [LO 9-5] During the current year, Martinez Company disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following Accumulated Depreciation (straight-line) $63,873 (13 years) 15,300 (6 years) Original Residual Value $5,500 2,600 Estimated Life 15 years 8 years Asset Cost Machine A $79,200 Machine B 23,000 The machines were disposed of in the following ways a. Machine A: Sold on January 2 for $23,000 caslh 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. Prepare the journal entries related to the disposal of Machine A and 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.) TIP: When no cash is received on disposal, the loss on disposal will equal the book value of the asset at the time of disposal View transaction list Journal entry worksheet

Explanation / Answer

Journal Entries Date Account Title and explanation Debit Credit Machiene - A) January , 02 Cash $                  23,000 Accumulated Depreciation $                  63,873       To Machiene A $                     79,200        To Gain on sale of Machiene A $                       7,673 (To record the sale of Machiene A) Machiene - B) Accumulated Depreciation $                  15,300 January , 02 Loss on disposal of Machiene B $                     7,700       To Machiene B $                     23,000 (To record the sale of Machiene B) CALCULATIN OF THE PROFIT OR LOSS ON SALE OF MACHINE A Original Cost of Machine= $                  79,200 LesS: Accumulated Depreciation $                  63,873 Book Value $                  15,327 Gain on sale value = Sales Price - Book Value = Gain on sale value = Sales Price - Book Value = $ 23,000 - $ 15,327 = $                     7,673 CALCULATIN OF THE PROFIT OR LOSS ON SALE OF MACHINE B Original Cost of Machine= $                  23,000 LesS: Accumulated Depreciation $                  15,300 Book Value $                     7,700 Gain on sale value = Sales Price - Book Value = $ 0 - $ 7,700 = $                   -7,700

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