Answer:
a. Journal entries to update depreciation for 2021:
Debit Depreciation expense $1,984
Credit Accumulated depreciation account $1,984
b. Journal entries to record the sale:
Debit Cash $13,020
Debit Accumulated depreciation account $12,400
Credit Gain on asset disposal $620
Credit Machinery asset $24,800
Explanation:
a. Depreciation of the machinery has been recorded at a rate of $2,976 per year.
Depreciation per month = $2,976/12 = $248. In 2021, the machinery is used from Jan 1 to August 31 (8 months).
Depreciation expense for 2021 = $248 x 8 = $1,984
Journal entries to update depreciation for 2021:
Debit Depreciation expense $1,984
Credit Accumulated depreciation account $1,984
b.
Accumulated depreciation account at December 31, 2020 has credit balance of $12,400 ($10,416 + $1,984 = $12,400)
The carrying amount of the machinery = Cost of the machinery - Accumulated depreciation = $24,800 - $12,400 = $12,400
Sales price - Carrying amount of the machinery = $13,020 - $12,400 = $620>0
The company recognizes gain on the sale. Journal entries to record the sale:
Debit Cash $13,020
Debit Accumulated depreciation account $12,400
Credit Gain on asset disposal $620
Credit Machinery asset $24,800
