Question

1. Assume that a machine with a cost of $2,000 has accumulated depreciation of $1,000. Assume it is sold for $1,500. Which of the following would be part of the journal entry to record this sale? a. debit Accumulated Depreciation for $1,000 b. debit the Machine account for $2,000 c. debit Loss on Disposal for $500 d. debit Gain on Disposal for $500

Answer 1

The correct answer is:

debit Gain on Disposal for $500 (d.)

Step-by-step explanation:

If you observe carefully, from the information given on the machine, you will notice that a gain of $500 was made from the sale of the machine, and this is shown below:

cost of machine = $2,000

accumulated depreciation = $1,000

value of the machine after depreciation = cost of machine - depreciation

= 2,000 - 1,000 = $1,000. However, we are told that the machine was sold for $500, meaning that there was a profit of $500, made on the sale, and this is recorded as debit Gain on Disposal.