Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 8, Problem 8.5AP
Recording and Interpreting the Disposal of Three Long-Lived Assets (P8-6)
LO8-3, 8-5 During the current year ended December 31, Rank Company disposed of three different assets. On January 1 of the current year, prior to their disposal, the asset accounts reflected the following:
| Asset | Original Cost | Residual Value | Estimated Life | |
| Machine A | $24,000 | $2,000 | 5 years | $17, 600 (4 years) |
| Machine B | 16,500 | 5,000 | 20 years | 4,025 (7 years) |
| Machine C | 59,000 | 3,200 | 14 years | 48,000 (12 years) |
The machines were disposed of during the current year in the following ways:
- a. Machine A: Sold on January 1 for $6,750 cash.
- b. Machine B: Sold on December 31 for $8,000; received cash, $2,000, and a $6,000 interest-bearing (10 percent) note receivable due at the end of 12 months.
- c. Machine C: On January 1, this machine suffered irreparable damage from an accident and was scrapped.
Required:
- 1. Give all
journal entries related to the disposal of each machine. - 2. Explain the accounting rationale for the way in which you recorded each disposal.
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Subject : Accounting
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Required information
(The following information applies to the questions displayed below.]
During the current year, Merkley Company disposed of three different assets. On January 1 of the current year, prior to the
disposal of the assets, the accounts reflected the following:
Accumulated
Original
Residual
Estimated
Life
8 years
8 years
Depreciation
(straight line)
$20,250 (6 years)
33,750 (6 years)
48,918 (12 years)
Asset
Cost
Value
Machine A
$ 30,000
$ 3,000
Machine B
49,000
4,000
Machine C
75,500
6,200
17 years
The machines were disposed of during the current year in the following ways:
a. Machine A: Sold on January 1 for $9,450 cash.
b. Machine B: Sold on December 31 for $10,325; received cash, $2,500, and a $7,825 interest-bearing (12 percent) note
receivable due at the end of 12 months.
c. Machine C: On January 1, this machine suffered irreparable damage from an accident. On January 10, a salvage
company removed the machine at no cost.
Required:
1. Give all journal entries related…
Chapter 8 Solutions
Financial Accounting
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