Question

Rayya Co. purchases a machine for $159,600 on January 1, 2019. Straight-line depreciation is taken each year for four years assuming a eight-year life and no salvage value. The machine is sold on July 1, 2023, during its fifth year of service.Prepare entries to record the partial year’s depreciation on July 1, 2023, and to record the sale under each seperate situation. (1) The machine is sold for $79,800 cash. (2) The machine is sold for $67,032 cash.

Answer 1

1. If the machine is sold for $79,800 cash, the entry to record the sale would be:

• Cash $79,800
• Accumulated Depreciation $89,775
• Loss on Sale $9,975
• Machine $159,600

2. If the machine is sold for $67,032 cash, the entry to record the sale would be:

• Cash $67,032
• Accumulated Depreciation $89,775
• Loss on Sale $22,743
• Machine $159,600

Step-by-step explanation:

To record the partial year's depreciation on July 1, 2023, we need to calculate the depreciation expense for the machine up until that date.

The machine was purchased on January 1, 2019, and it has a total useful life of 8 years. This means it will be depreciated evenly over 8 years.

We divide the machine's original cost by its useful life to get the annual depreciation expense:

$159,600 / 8 = $19,950 per year

Since the machine is sold on July 1, 2023, during its fifth year of service, we need to calculate the depreciation expense up until that date.

The device was put into use on January 1, 2019, and it will remain in operation until July 1, 2023.. Therefore, the accumulated depreciation up until July 1, 2023, is:

$19,950 * 4.5 = $89,775

Now let's record the entries for each situation:

(1) The machine is sold for $79,800 cash:

To record the partial year's depreciation on July 1, 2023:

Depreciation Expense $9,975

Accumulated Depreciation $9,975

To record the sale of the machine for $79,800 cash:

Cash $79,800

Accumulated Depreciation $89,775

Loss on Sale $9,975

Machine $159,600

(2)The monetary price of the machine is $67,032:

To be noted as the partial year's depreciation on July 1, 2023:

Depreciation Expense $9,975

Accumulated Depreciation $9,975

To record the sale of the machine for $67,032 cash:

Cash $67,032

Accumulated Depreciation $89,775

Loss on Sale $22,743

Machine $159,600

Answer 2

Solution and Explanation:

Depreciation expense is calculated as follows:

Depreciation expense = Cost of machine minus residul value divide useful life of asset

= (159600 - 0) / 8 = 19950

Thus, annual depreciation expense is $19950

Partial year depreciation expense = Anuual depreciation multiply period

= 19950 mulitply 0.5 = $9975

Thus, partial depreciation expense for the 01st january 2023 to July 1, 2023 is $9975

the jorunal entry is as follows:

Depreciation account Dr. 9975 ($)

Accumulated depreciation Cr. 9975 ($)

1. if machine is sold for $79800 cash

Cash 79800

Accumulated depreciation 89775

gain on sale of machinery 9975

Machinery 159600

2. If machine is sold for $67032

Cash 67032

Accumulated depreciation 89775

loss on sale of machinery 2793

Machinery 159600