Connect Access Card for Financial Accounting
9th Edition
ISBN: 9781259738678
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 8, Problem 8.6P
Recording and Interpreting the Disposal of Three Long-Lived Assets (AP8-5)
LO8-3 8-5 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:
| Asset | Original Cost | Residual Value | Estimated Life | ||
| Machine A | $21,000 | $3,000 | 8 years | $15,750 (7 years) | |
| Machine B | 50,000 | 4,000 | 10 years | 36,800 (8 years) | |
| Machine C | 85,000 | 5,000 | 15 years | 64,000 (12 years) | |
The machines were disposed of during the current year in the following ways:
- a. Machine A: Sold on January 1 for $5,000 cash.
- b. Machine B: Sold on December 31 for $10,500; received cash, $2,500, and an $8,000 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 to the disposal of each machine in the current year. - 2. Explain the accounting rationale for the way that you recorded each disposal.
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Connect Access Card for Financial Accounting
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