Question

During 2017, Ly Company disposed of two different assets. On January 1, 2017, prior to disposal of the assets, the accounts reflected the following: Asset Original Cost Residual Value Estimated Life Accumulated Depreciation (straight-line) Machine A $ 25,750 $ 2,500 5 years $ 18,600 (4 years) Machine B 67,200 3,450 15 years 55,250 (13 years) The machines were disposed of in the following ways: Machine A: This machine was sold on January 1, 2017, for $6,400 cash. Machine B: On January 1, 2017, this machine suffered irreparable damage from an accident and was removed immediately by a salvage company at no cost. Required: 1. Prepare the journal entries related to the disposal of each machine at the beginning of 2017. Transaction “a” relates to the recording of the 2017 depreciation and transaction “b” relates to the recording of the disposal of the machine. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Machine A - Jan. 1, 2017: Machine B - January 1, 2017: 2. Not available in Connect.

Answer 1

The journal entries related to the disposal of each machine at the beginning of 2017 is as follows:

1)The journal entries related to the disposal of each machine A is as follows:

Date	Account and Explanation	Debit ($)	Credit ($)
Jan.1, 2017	Cash	6,400
	Accumulated Depreciation	18,600
	Loss on disposal of Machine A	750
	Machine A		25,750
	(Recorded the diposal of Machine A at loss)

2)The journal entries related to the disposal of each machine B is as follows:

Date	Account and Explanation	Debit ($)	Credit ($)
Jan.1, 2017	Accumulated Depreciation	55,250
	Loss on disposal of Machine B	11,950
	Machine B		67,200
	(Recorded the diposal of Machine B )

Note: Depreciation for 2017 is not calculated because the Machine A and Machine B are both machines are sold at the begining of the year of 2017.