Question
During 2015, the Merkley Company disposed of three different assets. On January 1, 2015, prior to their disposal, the accounts reflected the following: The machines
During 2015, the Merkley Company disposed of three different assets. On January 1, 2015, prior to their disposal, the accounts reflected the following:
The machines were disposed of in the following ways:
a. Machine A: Sold on January 1, 2015, for $5,000 cash.
b. Machine B: Sold on December 31, 2015, for $10,500; received cash, $2,500, and a $8,000 interest-bearing (12 percent) note receivable due at the end of 12 months.
c. Machine C: On January 1, 2015, this machine suffered irreparable damage from an accident. On January 10, 2015, a salvage company removed the machine at no cost.
Required:
1. Give all journal entries related to the disposal of each machine in 2015.
2. Explain the accounting rationale for the way that you recorded each disposal.
Asset Original Residual Estimated Cost Value Life Machine A $21,000 $3,000 8 years Machine B 50,000 4,000 10 years Machine C 85,000 5,000 15 years Accumulated Depreciation (straight line) $15,750 (7 years) 36,800 (8 years) 64,000 (12 years)Step by Step Solution
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