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Answer:
Merkley Company
Journal Entries
1. Disposal of Machine A
January 01
Cash Debit $ 5,000
Accumulated depreciation Debit $ 15,750
Equipment Credit $ 18,000
Gain in sale of equipment Credit $ 2,750
To record sale of Machine A for cash and the resultant gain on disposal
3, Depreciation expense fro Machine B
December 31
Depreciation expense Debit $ 4,600
Accumulated depreciation Credit $ 4,600
To record depreciation expense on machine B for the year - disposal date
4. Disposal of Machine B
December 31
Cash Debit $ 2,500
Notes Receivable Debit $ 8,000
Accumulated Depreciation Debit $ 41,400
Equipment Credit $ 50,000
Gain in sale of equipment Credit $ 1,900
To record disposal of machine B for cash and notes receivable and to record the gain on disposal
January 01
4. Disposal of Machine C
Accumulated Depreciation Debit $ 64,000
Loss on disposal of equipment Debit $ 21,000
Equipment Credit $ 85,000
To record disposal of Machine C and the loss on disposal
Explanation:
Computation of gain/ loss for Disposal of Machine A
The equipment was sold on January 01, so no depreciation for the year needs to be recorded
Cost of equipment $ 18,000
Accumulated depreciation <u> $ 15,750</u>
Net Book Value of Machine A on date of disposal $ 2,250
Sale value in cash <u>$ 5,000</u>
Gain on disposal $ 2,750
Computation of depreciation expense of Machine B
The equipment was sold on December 31, so depreciation for the year needs to be recorded
Cost of equipment $ 50,000
Salvage value <u>$ ( 4,000)</u>
Depreciable value $ 46,000
Estimated useful life 10 years
Annual depreciation expenses $ 4,600
Computation of gain/ loss on disposal of Machine B
Cost of equipment $ 50,000
Accumulated depreciation - Opening $ 36,800
Depreciation of the year <u>$ 4,600 </u> <u>$ (41,400)</u>
Net book value - Date of disposal $ 8,600
Sale value in cash + note receivable <u>$ 10.500</u>
Gain on disposal $ 1,900
Accumulated depreciation <u> $ 15,750</u>
Net Book Value of Machine A on date of disposal $ 2,250
Sale value in cash <u>$ 5,000</u>
Gain on disposal $ 2,750
Computation of gain/ loss for Disposal of Machine C
The equipment was disposed on January 01, so no depreciation for the year needs to be recorded
Cost of equipment $ 85,000
Accumulated depreciation <u> $ 64,000</u>
Net Book Value of Machine C on date of disposal $ 21,000
Disposal value <u>$ 0</u>
Loss on disposal $ 21,000