On January 1, 2016, a company purchased a machine for $138,000 with an expected

Question

On January 1, 2016, a company purchased a machine for $138,000 with an expected life of 5 years and a residual value of $12,000. In addition, the company paid delivery costs of $1,200 and $4,800 to have the machine installed. The company uses the double-declining-balance method of depreciation.

Use the information above to answer the following question. If the company sells the machine at the end of 5 years and receives $11,500, the journal entry to record the sale will include which of the following?

a)Debit to Accumulated Depreciation for $138,000

b)Credit to Machine for $138,000

c)Debit to Loss on Sale for $500

d)Credit to Residual Value for $12,000

Explanation / Answer

Total cost of machine = 138000+1200+4800 = 144000

At the end of 5 years book value is equal to salvage value is 12000

If sale price is 11500

so loss on sale of machine = 11500-12000 = 500

so answer is c) Debit to loss on sale for $500

Date accounts & explanation debit credit Accumlated depreciatioon 132000 Cash 11500 Loss on sale 500 Machine 144000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

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