Question

Nash Corporation owns machinery that cost $24,400 when purchased on July 1, 2017. Depreciation has been recorded at a rate of $2,928 per year, resulting in a balance in accumulated depreciation of $10,248 at December 31, 2020. The machinery is sold on September 1, 2021, for $6,344. Prepare journal entries to (a) update depreciation for 2021 and (b) record the sale.No.
Account Titles and Explanation Debit Credit
(a) Depreciation Expense ??
Accumulated Depreciation-Machinery ??
(b) Cash 36330
Accumulated Depreciation-Machinery ??
Machinery ?? Gain on Disposal of Machinery ??

Answer 1

Answer:

(a)

Depreciation Expense (Debit): 1,952

Accumulated Depreciation-Machinery (Credit): 1,952

(b)

Cash (Debit): 36,330

Accumulated Depreciation-Machinery (Debit): 12,200

Machinery (Credit): 24,400

Gain of Machinery (Credit): 24,130

Explanation:

A)

Because (10,248 / 2928 = 3.5), we deduce that the depreciation is per month, So:

Depreciation Expense = 2,928 / 12 * 8 = 1,952

B)

Gain of Machinery = Cash - Net Book Value

Gain of Machinery = Cash - (Machinery Cost - Accumulated Depreciation-Machinery)

Gain of Machinery = Cash - Machinery Cost + Accumulated Depreciation-Machinery

Gain of Machinery = 36,330 - 24,000 + 12.000

Gain of Machinery =  24,130