P8-6 (Algo) Recording and Interpreting the Disposal of Three Long-Lived Assets LO8-3, 8-5

[The following information applies to the questions displayed below.]

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:

Asset	Original Cost		Residual Value		Estimated Life	Accumulated Depreciation (straight line)
Machine A	$	36,000	$	3,000	10 years	$	26,400 (8 years)
Machine B		61,000		4,000	10 years		45,600 (8 years)
Machine C		76,800		5,400	18 years		47,600 (12 years)

The machines were disposed of during the current year in the following ways:

a. Machine A: Sold on January 1 for $9,200 cash.

b. Machine B: Sold on December 31 for $10,400; received cash, $2,200, and a $8,200 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.

P8-6 Part 1

Required:

1. Give all journal entries related to the disposal of each machine in the current year.

a. Machine A.

b. Machine B.

c. Machine C.

Journal entry worksheet

• Record the depreciation of Machine A.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
January 01

• Record the disposal of Machine A.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
January 01

Journal entry worksheet

• Record the depreciation of Machine B.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
December 31

Journal entry worksheet

• Record the disposal of Machine B.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
December 31

Journal entry worksheet

• Record the depreciation of Machine C.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
January 01

Journal entry worksheet

• Record the disposal of Machine C.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
January 01