MoveIt Corporation is the world’s leading express-distribution company. In addition to its 643 aircraft, the company has more than 57,000 ground vehicles that pick up and deliver packages. Assume that MoveIt sold a delivery truck for $26,000. MoveIt had originally purchased the truck for $43,000 and had recorded depreciation for three years. Prepare the journal entry to record the disposal of the truck, assuming that Accumulated Depreciation was (a) $17,000, (b) $12,000, and (c) $19,000. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

We know, Gain (Loss) on sale of machine = Book value of the machine - Sale price = $(26,000 - 26,000) = $0. As the book value and the disposal value are same, there is no loss and no gain.

Requirement 2

If the accumulated depreciation of the machine was $12,000, the journal entry to record the transaction of disposal of machine will be as follows:

December 31 Cash Debit $26,000

Accumulated depreciation Debit $12,000

Loss on sale of equipment Debit $5,000

Machine Credit $43,000

Calculation:

Book value of the machine = Purchase price - Accumulated depreciation = $(43,000 - 12,000) = $31,000

We know, Loss on sale of machine = Sale price - Book value of the machine = $(31,000 - 26,000) = $5,000. Loss is a debit as it shows as the expense.

Requirement 3

If the accumulated depreciation of the machine was $19,000, the journal entry to record the transaction of disposal of machine will be as follows:

December 31 Cash Debit $26,000

Accumulated depreciation Debit $19,000

Gain on sale of machine Credit $2,000

Machine Credit $43,000

Calculation:

Book value of the machine = Purchase price - Accumulated depreciation = $(43,000 - 19,000) = $24,000

We know, Gain on sale of machine = Sale price - Book value of the machine = $(26,000 - 24,000) = $2,000. Gain is a credit as it shows as the income.

Tundexi Tundexi · Answer 2 · 2022-04-12T12:46:58+02:00

Because the book value and the disposal value are same, there is no loss and no gain.

As the Loss is a debit as it shows as the expense, its equals the sum of $5,000.

As the Gain is a credit, its equals the sum of $2,000

Requirement 1

If the accumulated depreciation of the machine was $17,000,

Book value of the machine = Purchase price - Accumulated depreciation

Book value of the machine = $(43,000 - 17,000)

Book value of the machine = $26,000

Journal entry to record the transaction of disposal of machine will be as follows:

Date Account titles Debit Credit

December 31 Cash $26,000

Accumulated depreciation $17,000

Machine $43,000

Requirement 2

If the accumulated depreciation of the machine was $12,000,

Book value of the machine = Purchase price - Accumulated depreciation

Book value of the machine = $(43,000 - 12,000)

Book value of the machine = $31,000

Loss on sale of machine = Sale price - Book value of the machine

Loss on sale of machine = $(31,000 - 26,000)

Loss on sale of machine = $5,000.

Journal entry to record the transaction of disposal of machine will be as follows:

Date Account titles Debit Credit

December 31 Cash $26,000

Accumulated depreciation $12,000

Loss on sale of equipment $5,000

Machine $43,000

Requirement 3

If the accumulated depreciation of the machine was $19,000,

Book value of the machine = Purchase price - Accumulated depreciation

Book value of the machine $(43,000 - 19,000)

Book value of the machine $24,000

Gain on sale of machine = Sale price - Book value of the machine

Gain on sale of machine = $(26,000 - 24,000)

Gain on sale of machine = $2,000

Journal entry to record the transaction of disposal of machine will be as follows:

Date Account titles Debit Credit

December 31 Cash $26,000

Accumulated depreciation $19,000

Gain on sale of machine $2,000

Machine $43,000