Answer:
Refer explanation
Explanation:
A. Straight-line depreciation is whereby the same amount is depreciated every year throughout the life of the asset. It is calculated as:
(Cost of asset - Salvage Value) / Estimated total number of life years of asset.
The depreciation per year for the machine would be: ($176400 - 0) / 7
= $25,200
Depreciation for partial year’s depreciation as at 01 July 2023 = $25,200 / 2 = $12,600
Debit : Depreciation account : $12600
Credit : Accumulated depreciation account : $12600
B. In order to account for sale, it should be identified whether it is a profit on sale or loss on sale. This is calculated by comparing the net book value of the asset at the time of sale, and it’s sale price. If the sale price is higher than the NBV, it is a profit on sale. If the sale price is lower than the NBV, it is a loss on sale. Net book value is calculated as cost of asset - accumulated depreciation.
If the asset was purchased on January 01 2019 and sold on July 01 2023, it was used for 4.5 years. Hence, the accumulated depreciation of the asset is $25200 x 4.5 = $113400.
NBV = $176400 - $113400 = $63000
(B1) Machine is sold for $75600
Profit on sale : $75600 - $63000 = $12600
Debit : Cash : $75600
Debit : Accumulated depreciation : $113400
Credit : Profit on sale of asset : $12600
Credit : Machinery Account : $176400
(B2) Machine is sold for $60480
Loss on sale : $60480 - $63000 = $2520
Debit : Cash : $60480
Debit : Loss on sale of asset : $2520
Debit : Accumulated depreciation :$113400
Credit : Machinery Account : $176400
