Diaz Company owns a machine that cost $126,500 and has accumulated depreciation of $94,100. Prepare the entry to record the disposal of the machine on January 1 in each seperate situation. The machine needed extensive repairs and was not worth repairing. Diaz disposed of the machine, receiving nothing in return. Diaz sold the machine for $16,200 cash. Diaz sold the machine for $32,400 cash. Diaz sold the machine for $40,900 cash.

a.

January 1 Accumulated depreciation $94100 Dr

Loss on disposal $32400 Dr

Machine Account $126500 Cr

b.

January 1 Cash $16200 Dr

Accumulated depreciation $94100 Dr

Loss on disposal $16200 Dr

Machine Account $126500 Cr

c.

January 1 Cash $32400 Dr

Accumulated depreciation $94100 Dr

Machine Account $126500 Cr

d.

January 1 Cash $40900 Dr

Accumulated depreciation $94100 Dr

Gain on disposal $8500 Cr

Machine Account $126500 Cr

Explanation:

The carrying value of the asset at January 1 is 126500 - 94100 = 32400

a. The asset is disposed off and no cash is received. So, there is a loss on disposal of 32400.

b. The asset is disposed off at 16200 cash. So, there is a loss on disposal of 32400 - 16200 = $16200.

a. The asset is disposed off at 32400. So, there is no gain or loss on disposal as Cash received is equal to net carrying value.

a. The asset is disposed off at 40900 cash. So, there is a gain on disposal of 40900 - 32400 = $8500.