Question

A machine costing $75,000 is purchased on September 1, Year 1. The machine is estimated to have a salvage value of $10,000 and an estimated useful life of 4 years. Double-declining-balance depreciation is used. If the machine is sold on December 31, Year 3 for $13,000, the journal entry to record the sale will include:

Answer 1

cash 13,000 debit

acc depreciation 65,000 debit

equipment 75,000 credit

gain on disposal 3,000 credit

Step-by-step explanation:

First we do the double declining depreciation for the machine to knwo his book value at the end of year 3:

`\left[\begin{array}{ccccc}Year&Beginning&Dep-Expense&Acc. \: Dep&Ending\\0&-&-&-&75000\\1&75000&37500&37500&37500\\2&37500&18750&56250&18750\\3&18750&8750&65000&10000\\\end{array}\right]`

The book value is 10,000 and we are selling for 13,000 therefore, we have a gain for 3,000

To record we write-off the equipment account and depreciation and recognize the gain and enter the cash proceeds from sale