Answer:
Situation 1: Diaz sold the machine for $16,100 cash
January 3
Dr. Cash $16,100
Dr. Loss on Disposal $18,600
Dr. Accumulated Depreciation $90,600
Cr. Machine $125,300
Situation 2: Diaz sold the machine for $34,700 cash.
January 3
Dr. Cash $34,700
Dr. Accumulated Depreciation $90,600
Cr. Machine $125,300
Situation 3: Diaz sold the machine for $40,300 cash
January 3
Dr. Cash $40,300
Dr. Accumulated Depreciation $90,600
Cr. Gain on Disposal $5,600
Cr. Machine $125,300
Explanation:
Accumulated depreciation is the sum of all the depreciation charged against the asset. This contra asset value. The asset is reported on the balance sheet after adjusting this value.
Situation 1 :
Machine is sold at loss, which is calculated as below
Net Book value of Machine = $125,300 - $90,600 = $34,700
$16,100 cash is received against the NBV of machine
Loss on machine = $34,700 - $16,100 = $18,600
Situation 2 :
Machine is sold at No gain no loss, which is calculated as below
Net Book value of Machine = $125,300 - $90,600 = $34,700
$34,700 cash is received against the NBV of machine, so there is no gain no loss on the disposal
Situation 3 :
Machine is sold at gain, which is calculated as below
Net Book value of Machine = $125,300 - $90,600 = $34,700
$40,300 cash is received against the NBV of machine
Loss on machine = $40,300 - $34,700 = $5,600
