Question

A machine that was purchased for $ 100 comma 000 has accumulated depreciation of $ 70 comma 000. The business exchanges the machine for a new one. The new machine has a market value of $ 120 comma 000​, and the business pays $ 100 comma 000 cash. Assume the exchange has commercial substance. This exchange results in a​ _

Answer 1

loss on disposal 10,000

Step-by-step explanation:

Olda Machine 100,000

Acc Dep (70,000)

Book Value 30,000

new Machine 120,000

cash payment (100,000)

value of the machine 20,000

traded value 20,000 - book value 30,000 = 10,000 loss

Other way to calculate:

receive - given up = result

120,000 - (100,000 cash + 30,000 machine) = -10,000

Journal entry:

machine 120,000

acc depreciation 70,000

loss on disposal 10,000

cash 100,000

old machine 100,000