Question

A copy machine cost $ 36 comma 000$36,000 when new and has accumulated depreciation of $ 34 comma 000$34,000. Suppose Sun Graphics and Designs CenterSun Graphics and Designs Center junks this​ machine, receiving nothing in return. What is the result of the disposal​ transaction?

Answer 1

Answer:

Loss of $2,000

Explanation:

As provided,

Cost of machine in both cases = $36,000

Accumulated depreciation = $34,000

Therefore, carrying value = Cost - Accumulated depreciation = $36,000 - $34,000 = $2,000

Now, since this asset is discarded as junk for $0, there will be a loss on such transaction to be recorded = $2,000

This loss shall be reported in income statement as Debit.

Further, after this transaction machine value in books shall be $0.

Journal Entry for this will be:

Loss on sale of Machinery A/c Dr.   $2,000

Accumulated Depreciation A/c Dr.    $34,000

                    To Machinery A/c                              $36,000