Blueprint Problem: Disposal of Fixed Assets Assume that you are the accountant for fotkin Manufacturing. The company purchased a machine on January 1, 2009, for $40,000, useful sfe to be five years and the residual value to be $4,000. Botkin uses the straight-line method ot depreciation. Botkin Manufacturing sold the machine on July 1, 2011, for $19,800 When the machine was purchased in 2009, it was recorded as n aset The machine has been used to generate revenue. Therefore, a portion of the cost of the machine must be allocated to reven each period. This is accomplished through and follows which accounting principle s Depreciation expense for each full year is calculated ty dividing the asset's depreciable cost by the useful life. The machine was sold on July 1, but had been uned during the first half of 2011. Therefore, you must frst seet Prepare the entry in the journal below. DOC. POST DEBIT DATE Not sure about the account title? Click on the categories below to view its chart of + Equity Revenues/ Gains Expenses Losses How does each row of the above journal entry affect the accounting equation, and on which financial statement is it reported? If an element ofthe accounting equation is not aected, select "No change" Liabilities Equity Financial Statement Next, you will Select case, there has been Selectbecause the amount received for the machine wasSelectthe book value of the machine. Now you must Select You must understand the following in order to complete the journal entry for the disposal . The machine sold for $19,800. Therefore, this amounts recorded as a sent to the Select e The asset has been sold, so you debit Accumulated Depreciation-Machine for Any gain or loss is recorded at this time. A gain would be recorded with a Select anda loss would be recorded with a Select You first determine the book value of the asset to be$ In this Prior to the sale, the machine account has a Selectbalance. You must Selectthe Machine account for the Complete the journal entry. If an amount box does not require an entry, leave it blank. GENERAL JOURNAL