Question

Sunland Corporation owns machinery that cost $27,200 when purchased on July 1, 2017. Depreciation has been recorded at a rate of $3,264 per year, resulting in a balance in accumulated depreciation of $11,424 at December 31, 2020. The machinery is sold on September 1, 2021, for $14,280.Prepare journal entries to (a) update depreciation for 2018 and (b) record the sale.

Answer 1

Step-by-step explanation:

The journal entries are shown below:

a. Depreciation Expense A/c Dr $2,176

To Accumulated Depreciation - Machinery A/c $2,176

(Being depreciation expense is recorded)

The depreciation expense is calculated for eight months (January - August)

b. Cash A/c Dr $14,280

Accumulated Depreciation - Machinery A/c $13,600

To Machinery A/c $27,200

To Gain on Disposal of Machinery $680

(Being sale of machinery is recorded and the remaining balance is credited to the Gain on Disposal of Machinery A/c)

The accumulated depreciation is computed below:

= $11,424 + $2,176

= $13,600