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During the current year, Merkley Company disposed of three different assets. On January 1 of the current year, prior to the disposal of the assets,

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During the current year, Merkley Company disposed of three different assets. On January 1 of the current year, prior to the disposal of the assets, the accounts reflected the following: Original Cost $ 21,000 50,000 85,000 Asset Machine A Machine B Machine C Residual Value $ 3,000 4,000 5,000 Estimated Life 8 years 10 years 15 years Accumulated Depreciation (straight line) 15,750 (7 years) 36,800 (8 years) 64,000 (12 years) $ The machines were disposed of during the current year in the following ways: a. Machine A: Sold on January 1 for $5,000 cash. b. Machine B: Sold on December 31 for $10,500; received cash, $2,500, and an $8,000 interest-bearing (12 percent) note receivable due at the end of 12 months. c. Machine C: On January 1, this machine suffered irreparable damage from an accident. On January 10, a salvage company removed the machine at no cost. 2. Explain the accounting rationale for the way that you recorded each disposal. Machine A: Disposal of a long-lived asset with the price below net book value results in a Machine B: Disposal of a long-lived asset with the price above net book value results in a Machine C: Disposal of a long-lived asset due to damage results in a remaining book value

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