Question

On December 31, 2020, Plattsville Plastics recently decided to dispose of an extrusion machine. The original cost was $461,000 and accumulated depreciation was $310,566. On December 31, 2020, the fair value of the machine was determined to be $111,000. On December 31, 2021, the fair value of the machine was determined to be $167,000. Which of the following would be included in a related adjusting entry on December 31, 2021?
A) credit Gain on Machine Held for Disposal for $167,000
B) credit Gain on Machine Held for Disposal for $56,000
C) credit Gain on Machine Held for Disposal for $39,434
D) No adjusting entry is required.

Answer 1

Answer:

C) credit Gain on Machine Held for Disposal for $39,434

Explanation:

Based on the information given if the original cost of the machine was the amount of $461,000 , Accumulated Depreciation was $310,566 while the fair value of the machine on Dec 31 ,2020 was the amount of $111,000 which means that the appropriate journal entry that will be included in a related adjusting entry on December 31, 2021 will be:

CREDIT GAIN on machine held for disposal for $39,434

($461,000-$310,566-$111,000)

(Original cost -Accumulated depreciation-Fair value)