Ask Question
23 March, 09:41

Marigold Company has an old factory machine that cost $61,750. The machine has accumulated depreciation of $34,580. Marigold has decided to sell the machine. (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.) (a) What entry would Marigold make to record the sale of the machine for $30,875 cash? (b) What entry would Marigold make to record the sale of the machine for $18,525 cash?

+5
Answers (1)
  1. 23 March, 13:33
    0
    a. Debit Other income/disposal account (p/l) $61,750

    Credit Fixed Asset account $61,750

    Being entries to derecognize the cost of the old factory sold

    Debit Accumulated depreciation account $34,580

    Credit Other income/disposal account (p/l) $34,580

    Being entries to derecognize the accumulated depreciation of the asset at the date of disposal

    Debit Cash account $30,875

    Credit Other income/disposal account (p/l) $30,875

    Being entries to record cash received on sale of old factory

    b. Debit Other income/disposal account (p/l) $61,750

    Credit Fixed Asset account $61,750

    Being entries to derecognize the cost of the old factory sold

    Debit Accumulated depreciation account $34,580

    Credit Other income/disposal account (p/l) $34,580

    Being entries to derecognize the accumulated depreciation of the asset at the date of disposal

    Debit Cash account $18,525

    Credit Other income/disposal account (p/l) $18,525

    Being entries to record cash received on sale of old factory

    Explanation:

    The carrying amount or net book value of an asset is the difference between the historical cost of the asset and the accumulated depreciation. When an asset is disposed, this carrying amount has to be derecognized and the proceed from the sale recognized. The difference between these two amounts is the gain/loss on disposal.

    When the amount received from the disposal of an asset is higher than the carrying value of the asset, the company makes a gain on disposal. The proceed from the disposal of an asset may be recorded in the disposal or other income account.

    On disposal, the carrying amount of the asset is derecognized by

    Debit Other income/disposal account (p/l)

    Credit Asset account

    with the cost of the asset, then,

    Debit Accumulated depreciation account

    Credit Other income/disposal account (p/l)

    With the accumulated depreciation of the asset at the date of disposal,

    Furthermore,

    Debit Cash account

    Credit Other income/disposal account (p/l)

    with the amount received from the disposal or sale of the asset
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Marigold Company has an old factory machine that cost $61,750. The machine has accumulated depreciation of $34,580. Marigold has decided to ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers