During the current year, Merkley Company disposed of three different assets. On January 1 of the current year, prior to the disposal of the assets, the accounts reflected the following:Asset Original Cost Residual Value Estimated Life Accumulated Depreciation (straight line)Machine A $21,000 $3,000 8 years $15,750 (7 years)Machine B 50,000 4,000 10 years 36,800 (8years)MachineC 85,000 5,000 15 years 64,000 (12 years)The machines were disposed of during the current year in the following ways:a. Machine A: Sold on January 1 for $5,000 cash.b. Machine B: Sold on December 31 for $10,500; received cash, $2,500, and an $8,000 interest-bearing (12 percent) note receivable due at the end of 12 months.c. Machine C: On January 1, this machine suffered irreparable damage from an accident. On January 10, a salvage company removed the machine at no cost.Prepare journal entries for the above transactions.

Question

16-03-2020
Business

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During the current year, Merkley Company disposed of three different assets. On January 1 of the current year, prior to the disposal of the assets, the accounts reflected the following:Asset Original Cost Residual Value Estimated Life Accumulated Depreciation (straight line)Machine A $21,000 $3,000 8 years $15,750 (7 years)Machine B 50,000 4,000 10 years 36,800 (8years)MachineC 85,000 5,000 15 years 64,000 (12 years)The machines were disposed of during the current year in the following ways:a. Machine A: Sold on January 1 for $5,000 cash.b. Machine B: Sold on December 31 for $10,500; received cash, $2,500, and an $8,000 interest-bearing (12 percent) note receivable due at the end of 12 months.c. Machine C: On January 1, this machine suffered irreparable damage from an accident. On January 10, a salvage company removed the machine at no cost.Prepare journal entries for the above transactions.

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abdullahfarooqi abdullahfarooqi · Answer 1 · 2020-03-20T05:28:09+01:00

abdullahfarooqi abdullahfarooqi

20-03-2020

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anthougo anthougo · Answer 2 · 2021-10-26T13:04:25+02:00

Journal Entries for recording the Merkley Company's transactions are as follows:

January 1:

Debit Sales/Disposal of Assets $5,250

Debit Accumulated Depreciation $15,750

Credit Equipment (Machine A) $21,000

To transfer the assets and accumulated depreciation to Sales/Disposal Account.

Debit Cash $5,000

Credit Sales/Disposal of Assets $5,000

To record the cash receipts from the disposal.

December 31:

Debit Sales/Disposal of Assets $13,200

Debit Accumulated Depreciation $36,800

Credit Equipment (Machine B) $50,000

To transfer the assets and accumulated depreciation to Sales/Disposal Account.

Debit Cash $2,500

Debit Notes Receivable $8,000

Credit Sales/Disposal of Assets $10,500

To record the cash receipts and notes receivable from the disposal.

January 1:

Debit Sales/Disposal of Assets $21,000

Debit Accumulated Depreciation $64,000

Credit Equipment (Machine C) $85,000

To transfer the assets and accumulated depreciation to Sales/Disposal Account.

Data Analysis:

Asset Original Cost Residual Value Estimated Life Accumulated

Depreciation

(straight line)

Machine A $21,000 $3,000 8 years $15,750 (7 years)

Machine B 50,000 4,000 10 years 36,800 (8 years)

Machine C 85,000 5,000 15 years 64,000 (12 years)

Machine A on January 1:

Sales of Assets = $5,000 (cash)

Book value = $5,250 ($21,000 - $15,750)

Loss on sale = $250 ($5,250 - $5,000)

Sales/Disposal of Assets $5,250 Accumulated Depreciation $15,750 Equipment (Machine A) $21,000

Cash $5,000 Sales/Disposal of Assets $5,000

Machine B on December 31:

Sales of Assets = $10,500 (Cash $2,500 Notes Receivable $8,000)

Book value = $13,200 ($50,000 - $36,800)

Loss on sale = $2,700 ($13,200 - $10,500)

Sales/Disposal of Assets $13,200 Accumulated Depreciation $36,800 Equipment (Machine A) $50,000

Cash $2,500 Notes Receivable $8,000 Sales/Disposal of Assets $10,500

Machine C on January 1:

Sales of Assets = $0

Book value = $21,000 ($85,000 - $64,000)

Loss on sale = $21,000 ($21,000 - $0)

Sales/Disposal of Assets $21,000 Accumulated Depreciation $64,000 Equipment (Machine A) $85,000

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