During the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following:| Asset | Original Cost | Residual Value | Estimated Life | Accumulated Depreciation (straight-line) ||------------|---------------|----------------|----------------|-----------------------------------------|| Machine A | $56,000 | $10,500 | 7 years | $26,000 (4 years) || Machine B | $15,200 | $2,400 | 5 years | $7,680 (3 years) |**The machines were disposed of in the following ways:**- **Machine A:** Sold on January 2, for $34,500 cash.- **Machine B:** On January 2, this machine was scrapped with zero proceeds (and zero cost of removal).**Required:**1. & 2. Prepare 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 transaction/event, select "No Journal Entry Required" in the first account field.)***Journal Entries:**1. **No Journal Entry Required**2. Date: January 02 - **Debit**: Cash $34,500 - **Debit**: Accumulated Depreciation-Equipment $26,000 - **Credit**: Gain on Disposal of PPE (Property, Plant, and Equipment)3. **No Journal Entry Required**4. Date: January 02 - **Credit**: Accumulated Depreciation-Equipment $7,680 - **Debit**: Loss on Disposal of PPEThe table illustrates the transactions required for each machine's disposal. For Machine A, there is a cash receipt and recorded gain, while for Machine B, the accumulated depreciation is credited, and a loss is recorded, indicating the write-off. ### Asset Disposal by Rayon CorporationDuring the current year, Rayon Corporation disposed of two different assets. On January 1, before their disposal, the accounts were as follows:#### Asset Information| Asset | Original Cost | Residual Value | Estimated Life | Accumulated Depreciation ||-------------|---------------|----------------|----------------|--------------------------|| Machine A | $56,000 | $10,500 | 7 years | $26,000 (4 years) || Machine B | $15,200 | $2,400 | 5 years | $7,680 (3 years) |#### Disposal Methods- **Machine A:** Sold on January 2, for $34,500 cash.- **Machine B:** On January 2, this machine was scrapped with zero proceeds (and zero cost of removal).#### Required Journal Entries1. Prepare the journal entries for the disposal of Machine A and Machine B on January 2 of the current year. If there is no entry required for a transaction/event, select "No Journal Entry Required."#### Journal Entries:- **Machine A Disposal** - **Entry 1**: No Journal Entry Required - **Entry 2**: - **Date:** January 02 - **General Journal:** - Cash: $34,500 (Debit) - Accumulated Depreciation-Equipment: $26,000 (Debit) - Gain on Disposal of PPE: [Amount not provided] (Credit)- **Machine B Disposal** - **Entry 3**: No Journal Entry Required - **Entry 4**: - **Date:** January 02 - **General Journal:** - Accumulated Depreciation-Equipment: $7,680 (Debit) - Loss on Disposal of PPE: [Amount not provided] (Credit)Note: The exact amounts for the gain or loss on disposal of PPE are not specified in the text provided. Ensure proper calculation based on the context for accurate reporting.

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Description: During the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following:| Asset | Original Cost | Residual Value | Estimated Life | Accumulated Depreciation (strai

When an asset is sold for more than the book value of an asset there is gain on disposal , if…

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During the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following: Residual Value. $10,500 2,400 7 years 5 years The machines were disposed of in the following ways: Asset Machine A Machine B a. Machine A: Sold on January 2, for $34,500 cash. b. Machine B: On January 2, this machine was scrapped with zero proceeds (and zero cost of removal). View transaction list / Required: 1.&2. Prepare the journal entries related to the disposal of Machine A and Machine B on January 2 of the current year. (If no entry required for a transaction/event, select "No Journal Entry Required" in the first account field.) No 1 Original Cost $56,000 15,200 2 3 4 Estimated Life View Journal entry worksheet Date January 02 January 02 January 02 January 02 No Journal Entry Required Accumulated Depreciation (straight-line). $26,000 (4 years). 7,680 (3 years) General Journal Cash Accumulated Depreciation-Equipment Gain on Disposal of PPE No Journal Entry Required Accumulated Depreciation-Equipment Loss on Disposal of PPE Debit 34,500 26,000 7,680 Credit

During the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following: Residual Value. $10,500 2,400 7 years 5 years The machines were disposed of in the following ways: Asset Machine A Machine B a. Machine A: Sold on January 2, for $34,500 cash. b. Machine B: On January 2, this machine was scrapped with zero proceeds (and zero cost of removal). View transaction list / Required: 1.&2. Prepare the journal entries related to the disposal of Machine A and Machine B on January 2 of the current year. (If no entry required for a transaction/event, select "No Journal Entry Required" in the first account field.) No 1 Original Cost $56,000 15,200 2 3 4 Estimated Life View Journal entry worksheet Date January 02 January 02 January 02 January 02 No Journal Entry Required Accumulated Depreciation (straight-line). $26,000 (4 years). 7,680 (3 years) General Journal Cash Accumulated Depreciation-Equipment Gain on Disposal of PPE No Journal Entry Required Accumulated Depreciation-Equipment Loss on Disposal of PPE Debit 34,500 26,000 7,680 Credit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

During the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following:

| Asset | Original Cost | Residual Value | Estimated Life | Accumulated Depreciation (straight-line) |
|------------|---------------|----------------|----------------|-----------------------------------------|
| Machine A | $56,000 | $10,500 | 7 years | $26,000 (4 years) |
| Machine B | $15,200 | $2,400 | 5 years | $7,680 (3 years) |

**The machines were disposed of in the following ways:**
- **Machine A:** Sold on January 2, for $34,500 cash.
- **Machine B:** On January 2, this machine was scrapped with zero proceeds (and zero cost of removal).

**Required:**

1. & 2. Prepare 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 transaction/event, select "No Journal Entry Required" in the first account field.)*

**Journal Entries:**

1. **No Journal Entry Required**

2. Date: January 02
- **Debit**: Cash $34,500
- **Debit**: Accumulated Depreciation-Equipment $26,000
- **Credit**: Gain on Disposal of PPE (Property, Plant, and Equipment)

3. **No Journal Entry Required**

4. Date: January 02
- **Credit**: Accumulated Depreciation-Equipment $7,680
- **Debit**: Loss on Disposal of PPE

The table illustrates the transactions required for each machine's disposal. For Machine A, there is a cash receipt and recorded gain, while for Machine B, the accumulated depreciation is credited, and a loss is recorded, indicating the write-off.

### Asset Disposal by Rayon Corporation

During the current year, Rayon Corporation disposed of two different assets. On January 1, before their disposal, the accounts were as follows:

#### Asset Information

| Asset | Original Cost | Residual Value | Estimated Life | Accumulated Depreciation |
|-------------|---------------|----------------|----------------|--------------------------|
| Machine A | $56,000 | $10,500 | 7 years | $26,000 (4 years) |
| Machine B | $15,200 | $2,400 | 5 years | $7,680 (3 years) |

#### Disposal Methods

- **Machine A:** Sold on January 2, for $34,500 cash.
- **Machine B:** On January 2, this machine was scrapped with zero proceeds (and zero cost of removal).

#### Required Journal Entries

1. Prepare the journal entries for the disposal of Machine A and Machine B on January 2 of the current year. If there is no entry required for a transaction/event, select "No Journal Entry Required."

#### Journal Entries:

- **Machine A Disposal**

- **Entry 1**: No Journal Entry Required

- **Entry 2**:
- **Date:** January 02
- **General Journal:**
- Cash: $34,500 (Debit)
- Accumulated Depreciation-Equipment: $26,000 (Debit)
- Gain on Disposal of PPE: [Amount not provided] (Credit)

- **Machine B Disposal**

- **Entry 3**: No Journal Entry Required

- **Entry 4**:
- **Date:** January 02
- **General Journal:**
- Accumulated Depreciation-Equipment: $7,680 (Debit)
- Loss on Disposal of PPE: [Amount not provided] (Credit)

Note: The exact amounts for the gain or loss on disposal of PPE are not specified in the text provided. Ensure proper calculation based on the context for accurate reporting.

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