During 2017, Ly Company disposed of two different assets. On January 1, 2017, prior to disposal of the assets, the accounts reflected the following: 

The machines were disposed of in the following ways: 

a. Machine A: This machine was sold on January 1, 2017, for $5,750 cash. 

b. Machine B: On January 1, 2017, this machine suffered irreparable damage from an accident and was removed immediately by a salvage company at no cost. 

Required: 

1. Give the journal entries related to the disposal of each machine at the beginning of 2017. Transaction “a” relates to the recording of the 2017 depreciation and transaction “b” relates to the recording of the disposal of the machine. 

2. Explain the accounting rationale for the way that you recorded each disposal.

Transcribed Image Text:

Accumulated Original Residual Estimated Depreciation (straight-line) Asset Cost Value Life Machine A $24,000 $2,000 5 years $17,600 (4 years) Machine B 59,200 3,200 14 years 48,000 (12 years)