SALE OF PLANT ASSET Pacifica Manufacturing retired a computerized metal stamping machine on December 31, 2009. Pacifica sold the machine to another company and did not replace it. The following data are available for the machine:

Cost (installed), 1/1/2004 $920,000 Residual value expected on 1/1/2004 160,000 Expected life, 1/1/2004 8 years The machine was sold for $188,000 cash. Pacifica uses the straight-line method of depreciation.

Required:

. Prepare the journal entry to record depreciation expense for 2009.

. Compute accumulated depreciation at December 31, 2009.

. Prepare the journal entry to record the sale of the machine.

. Explain how the gain or loss on the sale would be reported on the 2009 income statement.

Exercise