Ly Company disposed of two different assets. On January 1, prior to disposal of the assets, the accounts reflected the following: Asset Original Cost Residual Value Estimated Life Accumulated Depreciation (straight-line) Machine A $ 25,050 $ 2,300 5 years $ 18,200 (4 years) Machine B 65,600 3,350 15 years 53,950 (13 years) The machines were disposed of in the following ways: Machine A: This machine was sold on January 1 for $6, 140 cash. Machine B: On January 1, this machine suffered irreparable damage from an accident and was removed immediately by a salvage company at no cost. Required: 1. Prepare the journal entries related to the disposal of each machine at the beginning of the current year. Transaction "a" relates to the recording of the depreciation, and transaction "b" relates to the recording of the disposal of the machine. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Ly Company disposed of two different assets. On January 1, prior to disposal of the assets, the accounts reflected the following: Asset Original Cost Residual Value Estimated Life Accumulated Depreciation (straight-line) Machine A $ 25,050 $ 2,300 5 years $ 18,200 (4 years) Machine B 65,600 3,350 15 years 53,950 (13 years) The machines were disposed of in the following ways: Machine A: This machine was sold on January 1 for $6, 140 cash. Machine B: On January 1, this machine suffered irreparable damage from an accident and was removed immediately by a salvage company at no cost. Required: 1. Prepare the journal entries related to the disposal of each machine at the beginning of the current year. Transaction "a" relates to the recording of the depreciation, and transaction "b" relates to the recording of the disposal of the machine. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Ly Company disposed of two different assets. On January 1, prior to disposal of the assets, the accounts reflected the
following: Asset Original Cost Residual Value Estimated Life Accumulated Depreciation (straight-line) Machine A $
25,050 $ 2,300 5 years $ 18,200 (4 years) Machine B 65,600 3,350 15 years 53,950 (13 years) The machines were
disposed of in the following ways: Machine A: This machine was sold on January 1 for $6, 140 cash. Machine B: On
January 1, this machine suffered irreparable damage from an accident and was removed immediately by a salvage
company at no cost. Required: 1. Prepare the journal entries related to the disposal of each machine at the beginning
of the current year. Transaction "a" relates to the recording of the depreciation, and transaction "b" relates to the
recording of the disposal of the machine. (If no entry is required for a transaction/event, select "No journal entry
required" in the first account field.)
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