Reference no: EM131752013
Question: During 2015, the Merkley Company disposed of three different assets. On January 1, 2015, prior to their disposal, the accounts reflected the following:
Asset |
Original Cost |
Residual Value |
Estimated Life |
Accum. Depreciation
(Straight line)
|
Machine A |
$21,000 |
$3,000 |
8 years |
$15,750 (7 years) |
Machine B |
$50,000 |
$4,000 |
10 years |
$36,800 (8 years) |
Machine C |
$85,000 |
$5,000 |
15 years |
$64,000 (12 years) |
The machines were disposed of in the following ways:
a. Machine A: Sold on January 1, 2015, for $5,000 cash.
b. Machine B: Sold on December 31, 2015, for $10,500; received cash, $2,500, and a $8,000 interest-bearing (12 percent) note receivable due at the end of 12 months.
c. Machine C: On January 1, 2015, this machine suffered irreparable damage from an accident. On January 10, 2015, a salvage company removed the machine at no cost.
Required: 1. Give all journal entries related to the disposal of each machine in 2015.
2. Explain the accounting rationale for the way that you recorded each disposal.
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