Ly Company disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following: Asset Original Cost Residual Value Estimated Life Accumulated Depreciation (straight-line) Machine A $ 35,000 $ 3,800 6 years $ 26,000 (5 years) Machine B 67,200 4,200 12 years 47,250 (9 years) The machines were disposed of in the following ways: Machine A: Sold on January 1 for $9,200 cash. Machine B: On January 1, this machine was sold to a salvage company at zero proceeds (and zero cost of removal). Required: 1. & 2. Prepare the journal entries related to the disposal of Machine A and B at the beginning of the current year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
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.
Ly Company disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following:
| Asset | Original Cost | Residual Value | Estimated Life | Accumulated Depreciation (straight-line) | |||||||
| Machine A | $ | 35,000 | $ | 3,800 | 6 | years | $ | 26,000 | (5 years) | ||
| Machine B | 67,200 | 4,200 | 12 | years | 47,250 | (9 years) | |||||
The machines were disposed of in the following ways:
- Machine A: Sold on January 1 for $9,200 cash.
- Machine B: On January 1, this machine was sold to a salvage company at zero proceeds (and zero cost of removal).
Required:
-
1. & 2. Prepare the journal entries related to the disposal of Machine A and B at the beginning of the current year. (If no entry is required for a transaction/event, select "No
Journal Entry Required" in the first account field.)
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