Ask Question
3 November, 18:31

Diaz Company owns a machine that cost $125,200 and has accumulated depreciation of $93,100. Prepare the entry to record the disposal of the machine on January 1 in each seperate situation. The machine needed extensive repairs and was not worth repairing. Diaz disposed of the machine, receiving nothing in return. Diaz sold the machine for $16,400 cash. Diaz sold the machine for $32,100 cash. Diaz sold the machine for $41,300 cash.

+5
Answers (1)
  1. 3 November, 18:48
    0
    1. Loss on sale of machine = $15,700

    2. No Loss or Gain

    3. Gain = $9,200

    Explanation:

    Requirement 1

    If Diaz Company disposed the machine with a cash of $16,400, the journal entry to record the transaction of disposal of machine will be as follows:

    January 1 Cash Debit $16,400

    Accumulated depreciation Debit $93,100

    Loss on sale of machine Debit $15,700

    Machine Credit $125,200

    Calculation:

    Book value of the machine = Purchase price - Accumulated depreciation = $ (125,200 - 93,100) = $32,100

    We know, loss on sale of machine = Book value of the machine - Sale price = $ (32,100 - 16,400) = $15,700. Loss is a debit as it is an expense.

    Requirement 2

    If Diaz Company disposed the machine with a cash of $32,100, the journal entry to record the transaction of disposal of machine will be as follows:

    January 1 Cash Debit $32,100

    Accumulated depreciation Debit $93,100

    Machine Credit $125,200

    Calculation:

    Book value of the machine = Purchase price - Accumulated depreciation = $ (125,200 - 93,100) = $32,100

    We know, Gain (Loss) on sale of machine = Book value of the machine - Sale price = $ (32,100 - 32,100) = $0. As the book value and the disposal value are same, there is no loss and no gain.

    Requirement 3

    If Diaz Company disposed the machine with a cash of $41,300, the journal entry to record the transaction of disposal of machine will be as follows:

    January 1 Cash Debit $41,300

    Accumulated depreciation Debit $93,100

    Gain on sale of machine Credit $9,200

    Machine Credit $125,200

    Calculation:

    Book value of the machine = Purchase price - Accumulated depreciation = $ (125,200 - 93,100) = $32,100

    We know, Gain on sale of machine = Sale price - Book value of the machine = $ (41,300 - 32,100) = $9,200. Gain is a credit as it shows as the income.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Diaz Company owns a machine that cost $125,200 and has accumulated depreciation of $93,100. Prepare the entry to record the disposal of the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers