The information is incomplete, but we can assume that the machine was sold at the fifth year for an X amount of money, so we should prepare the journal records. Since we are not given the sales amount, I will just use any number, like $50,000. You can adjust the calculation depending on the exact sales amount.
Explanation:
January 2, Year 1, purchase of machine:
Dr Machinery 144,000
Cr Cash 144,000
January 3, Year 1, additional expenses needed to put machine into service (electric wiring):
Dr Machinery 10,000
Cr Cash 10,000
January 3, Year 1, additional expenses needed to put machine into service (installation):
Dr Machinery 2,000
Cr Cash 2,000
The machine's total cost = $144,000 + $10,000 + $2,000 = $156,000
depreciation expense per year = ($156,000 - salvage value) / 6 years = ($156,000 - $17,280) / 6 = $23,120
Accumulated depreciation during 5 years = $23,120 x 5 = $115,600, carrying value = $156,000 - $115,600 = $40,400
If the machine is sold at $50,000, the journal entries should be:
December 31, year 5, machine is sold:
Dr Cash 50,000
Dr Accumulated depreciation $115,600
Cr Machinery 156,000
Cr Gain on disposal 9,600
Gain on disposal = cash received - carrying value = $50,000 - $40,400 = $9,600
