Answer:
a. Debit Other income/disposal account (p/l) $61,750
Credit Fixed Asset account $61,750
Being entries to derecognize the cost of the old factory sold
Debit Accumulated depreciation account $34,580
Credit Other income/disposal account (p/l) $34,580
Being entries to derecognize the accumulated depreciation of the asset at the date of disposal
Debit Cash account $30,875
Credit Other income/disposal account (p/l) $30,875
Being entries to record cash received on sale of old factory
b. Debit Other income/disposal account (p/l) $61,750
Credit Fixed Asset account $61,750
Being entries to derecognize the cost of the old factory sold
Debit Accumulated depreciation account $34,580
Credit Other income/disposal account (p/l) $34,580
Being entries to derecognize the accumulated depreciation of the asset at the date of disposal
Debit Cash account $18,525
Credit Other income/disposal account (p/l) $18,525
Being entries to record cash received on sale of old factory
Step-by-step explanation:
The carrying amount or net book value of an asset is the difference between the historical cost of the asset and the accumulated depreciation. When an asset is disposed, this carrying amount has to be derecognized and the proceed from the sale recognized. The difference between these two amounts is the gain/loss on disposal.
When the amount received from the disposal of an asset is higher than the carrying value of the asset, the company makes a gain on disposal. The proceed from the disposal of an asset may be recorded in the disposal or other income account.
On disposal, the carrying amount of the asset is derecognized by
Debit Other income/disposal account (p/l)
Credit Asset account
with the cost of the asset, then,
Debit Accumulated depreciation account
Credit Other income/disposal account (p/l)
With the accumulated depreciation of the asset at the date of disposal,
Furthermore,
Debit Cash account
Credit Other income/disposal account (p/l)
with the amount received from the disposal or sale of the asset