Question

A machine having a book value on 1/1/20 of $3,000 was sold on 4/1/20 for $3,300....

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.

Homework Answers

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

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