Sweet Corporation owns machinery that cost $22,000 when purchased on July 1, 2017. Depreciation has been recorded at a rate of $2,640 per year, resulting in a balance in accumulated depreciation of $9,240 at December 31, 2020. The machinery is sold on September 1, 2021, for $11,550. Prepare journal entries to (a) update depreciation for 2021 and (b) record the sale.

Answer and Explanation:

The journal entries are shown below:

a. Depreciation expense $1,60

To Accumulated depreciation $1,600

(Being the depreciation expense is recorded)

Since the machinery is purchase on July 1 and the depreciation is calculated till December so we have to considered 6 months depreciation which is shown below:

= $2,640 * 6 months : 12 months

= $1,320

b. The another entry for selling the machine is

Cash $11,550

Accumulated depreciation $10,560 ($9,240 + $1,320)

To Machinery A/c $22,000

To Gain on sale of machinery $110

(being the sale of machinery is recorded)

The gain on sale of machinery is a balancing figure