Question

Bylie Company has an old factory machine that cost $50,000. The machine has accumulated depreciation of $28,000. Bylie has decided to sell the machine.

a) What entry would Bylie make to record the sale of the machine for $25,000 cash?

b) What entry would Bylie make to record the sale of the machine for $15,000 cash?

Answer 1

A)

Cash $25000 Dr

Accumulated depreciation-Machine $28000 Dr

Machine $50000 Cr

Gain on disposal $3000 Cr

B)

Cash $15000 Dr

Accumulated depreciation-Machine $28000 Dr

Loss on disposal $7000 Dr

Machine $50000 Cr

Step-by-step explanation:

The net book value of the machine is cost - accumulated depreciation.

Thus, the NBV = 50000 - 28000 = $22000

a. The gain on disposal = Cash received - NBV

Gain on disposal = 25000 - 22000 = $3000 gain

b. The gain on disposal = 15000 - 22000 = -$7000 (loss on disposal)