AP8-5 LO8-3,8-5 Recording and Interpreting the Disposal of Three Long-Lived Assets (P8-5) During the current year ended December 31, Rank Company disposed of three different assets. On January 1 of the current year, prior to their disposal, the asset accounts reflected the following: Asset Machine A Original Cost $24,000 Residual Value $2,000 Estimated Life 5 years Accumulated Depreciation (straight line) Machine B 16,500 5,000 20 years $17,600 (4 years) 4,025 (7 years) Machine C 59.200 3,200 14 years 48,000 (12 years) The machines were disposed of during the current year in the following ways: a. Machine A: Sold on January 1 for $6,750 cash. b. Machine B: Sold on December 31 for $8,000; received cash, $2,000, and a $6,000 interest-bearing (10 percent) note receivable due at the end of 12 months. c. Machine C: On January 1, this machine suffered irreparable damage from an accident and was scrapped. Required: 1. Prepare all journal entries related to the disposal of each machine. Page 459 2. Explain the accounting rationale for the way in which you recorded each disposal.