Question

On January 2, 2017, Bering Co. disposes of a machine costing $44,000 with accumulated depreciation of $24,625. Prepare the entries to record the disposal. under each of the following separate assumptions. 1.The machine is sold for $18,250 cash.2.The machine is traded in for a newer machine having a $60,200 cashprice. A $25,000 trade-in allowance is received, and the balance is paidin cash. Assume the asset exchange has commercial substance.3.The machine is traded in for a newer machine having a $60,200 cashprice. A $15,000 trade-in allowance is received, and the balance is paidin cash. Assume the asset exchange has commercial substance.

Answer 1

Scenario 1: Loss on Disposal of $1,125

Scenario 2: Gain on Disposal of $5,625

Scenario 3: Loss on Disposal of $4,375

Step-by-step explanation:

Scenario 1

Debit Credit

Debit Cash Received $18,250

Debit Accumulated Depreciation $24,625

Debit Loss on Disposal (Balancing Figure) $1,125

Credit Machine at Cost $44,000

(To record disposal of Machine for Cash)

Scenario 2

Debit Credit

Debit New Machine - Trade in Allowance $25,000

Debit Accumulated Depreciation $24,625

Credit Gain on Disposal (Balancing Figure) $5,625

Credit Machine at Cost $44,000

(To record disposal of Machine with Trade in Allowance)

Debit New Machine at Cost $60,200

Credit Trade in Allowance $25,000

Credit Cash $35,200

(To record acquisition of New Machine)

Scenario 3

Debit Credit

Debit New Machine - Trade in Allowance $15,000

Debit Accumulated Depreciation $24,625

Debit Loss on Disposal (Balancing Figure) $4,375

Credit Machine at Cost $44,000

(To record disposal of Machine with Trade in Allowance)

Debit New Machine at Cost $60,200

Credit Trade in Allowance $15,000

Credit Cash $45,200

(To record acquisition of New Machine)