Blue Corporation owns machinery that cost $25,200 when purchased on July 1, 2014

Question

Blue Corporation owns machinery that cost $25,200 when purchased on July 1, 2014. Depreciation has been recorded at a rate of $3,024 per year, resulting in a balance in accumulated depreciation of $10,584 at December 31, 2017. The machinery is sold on September 1, 2018, for $13,230.

Prepare journal entries to (a) update depreciation for 2018 and (b) record the sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.

Account Titles and Explanation

Debit

Credit

(a)

(b)

Open Show Work

No.

Account Titles and Explanation

Debit

Credit

(a)

(b)

Explanation / Answer

As the asset is sold on September 1, 2018, depreciation for 2018 will for 8 months i.e. from january 1 to august 31. Yearly depreciation is given as $3,024.

Depreciation for year 2018 = $3,024 * 8/12 = $2,016

Calcualtion of cost of machinery as on September 1, 2018:

july 1, 2014 to 31 december 2014 ( 6 months )

($3,024 * 6/12)

Calculation of profit / loss on sale of machinery:

Journal Entries:

Depreciation expense

particulars $ $ purchase cost of machinery 25,200 less: Total accumulated deperciation

july 1, 2014 to 31 december 2014 ( 6 months )

($3,024 * 6/12)

(1,512) 2015 (3,024) 2016 (3,024) 2017 (3,024) january 1 2018 to august 31,2018 (2,016) (12,600) cost of machinery as on september 1, 2018 12,600

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