Question

Rayya Co. purchases a machine for $210,000 on January 1, 2019. Straight-line depreciation is taken each year for four years assuming a eight-year life and no salvage value. The machine is sold on July 1, 2023, during its fifth year of service.

Prepare entries to record the partial year’s depreciation on July 1, 2023, and to record the sale under each seperate situation. (1) The machine is sold for $105,000 cash. (2) The machine is sold for $88,200 cash.

Answer 1

Accumululated depreciation:

= [($210,000 / 8) X 4] + $13,125

= $118,125

No	Date	Accounts	Debit	Credit
	July 1, 2023	Depreciatoin expense [($210,000/ 8) / 2]	$13,125	-
		Accumulated depreciation	-	$13,125
1	July 1, 2023	Cash	$105,000	-
		Accumulated depreciation	$118,125	-
		Gain on sale of machine	-	$13,125
		Machine		$210,000
2	July 1, 2023	Cash	$88,200	-
		Accumulated depreciation	$118,125	-
		Loss on sale of machine	$3,675	-
		Machine		$210,000