Answer:
(a) Journal entries to update depreciation for 2018
Debit depreciation expense $500
Credit Accumulated depreciation $500
(b) Journal entries to record sales
To derecognize the asset
Debit Disposal account (p/l) $10,000
Credit asset account $10,000
To recognize the money received on disposal
Debit Cash/ Accounts receivable $10,500
Credit Disposal account (p/l) $10,500
Explanation:
Given the following information on Ottawa Corporation's machinery;
Cost = $20,000 (July 1, 2014)
Depreciation per year = $2,400
Accumulated depreciation = $8,400 (at December 31, 2017)
Then, the net book value of the asset at December 31, 2017
= 20000 - 8400
= $11,600
if the machinery is sold on September 1, 2018, for $10,500
Additional Depreciation (between 1 January and 31 August 2018) would have been computed
=8/12 × 2400
= $1,600
Net book value as at September 1, 2018
= 11600 -16000
= $10,000
Income on disposal = $10,500
Gain on disposal = $10,500 - $10,000
= $500
(a) Journal entries to update depreciation for 2018
Debit depreciation expense $500
Credit Accumulated depreciation $500
(b) Journal entries to record sales
To derecognize the asset
Debit Disposal account (p/l) $10,000
Credit asset account $10,000
To recognize the money received on disposal
Debit Cash/ Accounts receivable $10,500
Credit Disposal account (p/l) $10,500
