On May 1, 2017 Merron Inc. sold a machine that it no longer had any use for. Merron sold the machine for $2,000 cash. The original cost of the machine was $32,000 and at December 31, 2016 the accumulated depreciation on the machine was $26,000. The machine had an original useful life of 10 years with zero estimated residual value. Merron uses the straight-line method to depreciate all of their machines. Required: Prepare the journal entries required for this transaction.
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.
On May 1, 2017 Merron Inc. sold a machine that it no longer had any use for. Merron sold the machine for $2,000 cash. The original cost of the machine was $32,000 and at December 31, 2016 the
Required:
Prepare the journal entries required for this transaction.
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