Required information P8-6 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 their disposal, the accounts reflected the following: Asset Machine A Machine B Machine C Original Cost $ 36,000 65,000 75,900 Residual Value $ 3,000 4,000 5,700 Estimated Life 6 years 8 years 17 years Accumulated Depreciation (straight line) $ 22,000 (4 years) 45,750 (6 years) 49,553 (12 years) The machines were disposed of in the following ways: a. Machine A: Sold on January 1 for $13,500 cash. b. Machine B: Sold on December 31 for $12,225; received cash, $2,200, and a $10,025 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