On January 1, 2016, Horton Inc. sells a machine for $23,000. The machine was ori

Question

On January 1, 2016, Horton Inc. sells a machine for $23,000. The machine was originally purchased on January 1, 2014 for $40,000. The machine was estimated to have a useful life of 5 years and no residual value. Horton uses straight-line depreciation.

On January 1, 2016, Horton Inc. sells a machine for $23,000. The machine was originally purchased on January 1, 2014 for $40,000. The machine was estimated to have a useful life of 5 years and no residual value. Horton uses straight-line depreciation.

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Annual Depreciation = Initial Cost/Estimated Life = 40000/5 = 8000 per Year

Depreciation for the Period 1 January 2014 to 31 December 2015 = 2*8000 = 16000

Journal Entry:

Cash Dr. 23000

Accumulated Depreciation Dr. 16000

Loss on Sale of Machinry (40000 - 16000 -23000) Dr. 1000

Machinery Cr. 40000

(Being Machine Sold for Cash)

Notes:

Loss on Sale of Machine = Sales Value - Book Value = 23000 - (40000 - 16000) = -1000

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.