Question

A machine having a book value on 1/1/20 of $3,000 was sold on 4/1/20 for $3,300. The original cost of the machine (acquired on 1/1/18) was $5,000. At that time, the estimated life of the machine was five years, with no residual value. The last entry for depreciation (straight-line) was made on 12/31/19.

Prepare the two journal entries required on 4/1/20.

Answer 1

Answer :

Date	Account title	Debit	Credit
April 01, 2020	Depreciation	$250
	Accumulated depreciation ($5,000 ÷ 5) × 3/12		$250
April 01, 2020	Cash	$3,300
	Accumulated depreciation	$2,250
	Machine		$5,000
	Gain on sale of machine		$550

Workings :

1)Depreciation per year = (cost of asset - residual value) ÷ life of asset

= ($5,000 - $0) ÷ 5

= $1,000

2) Accumulated Depreciation on 01/04/2020 :

Depreciation for 2018 + Depreciation for 2019 + Depreciation for 2020 (3 months)

= $1,000 +$1,000 + $250

= $2,250