Answer:
The journal entries related to the disposal of Machine A and B at the beginning of the current year.
Machine A:
Debit Accumulated depreciation $25,680
Debit Cash (sales proceed) $10,800
Credit Asset (Machine cost) $36,000
Credit Gain on disposal $480
(To record disposal of Machine A)
Machine B:
Debit Accumulated depreciation $50,050
Debit Cash (sales proceed) $0
Debit Loss on disposal $18,150
Credit Asset (Machine cost) $68,200
(To record disposal of Machine B)
Step-by-step explanation:
Machine A: Using straight-line depreciation method = (Cost - Residual Value) / Useful life: ($36,000 - $3,900) / 5 years = $6,420/year
$6,420/year x 4 years = $25,680
The net book value of the asset is $36,000 - $25,680 = $10,320. Gain on disposal is $10,800 - $10,320 = $480
Machine B: Depreciation: ($68,200 - $4,500) / 14 years = $4,550/year
$4,550/year x 11 years = $50,050
The net book value of the asset is $68,200 - $50,050 = $18,150. Loss on disposal is $0 - $18,150 = -$18,150