During the current year Rayon Corporation disposed of two di

During the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following Original Cost Machine A $69,000 $12,000 Accumulated Depreciation (straight-line) Estimated Residual Value Life 9 years 7 years Asset $38,000 (6 years) Machine B 15,100 2,500 9,000 (5 years) The machines were disposed of in the following ways a. Machine A: Sold on January 2, for $34,400 cash b. Machine B: On January 2, this machine suffered irreparable damage from an accident and was removed immediately by a salvage company at no cost Required: 1&2. Give the journal entries related to the disposal of Machine A and Machine B on January 2 of the current year. (If no entry is required for a transactionlevent, select \"No Journal Entry Required\" in the first account field.)

Solution

The following are the journal entries:

date	accounts	debit	credit
jan 2	No entry for depreciation of machine A
Jan 2	Cash a/c	$34,400
	Accumulated depreciation - equipment a/c	$38,000
	.............To Equipment a/c		$69,000
	............To Gain on disposal a/c		$3,400
	(gain = sale value - (original cost - accumulated depreciation))=>(34,400 - (69,000-38,000))
Jan 2	No journal entry for depreciation on machine B.
jan 2	Accumulated depreciation - equipment a/c	9,000
	Loss on disposal a/c	6,100
	..........To Equipment a/c		15,100
	(loss on disposal = original cost - accumulated depreciation)=>(15,100 - 9,000)=>6,100)