Question

Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. the company sells the machinery for cash of $42,000. the journal entry to record the sale would include:

Answer 1

The overall concept for the accounting for asset disposals is to reverse both the recorded cost of the asset and the reciprocal amount of accumulated depreciation. Any remaining difference between the two is recognized as either a gain or a loss. The gain or loss is calculated as the net disposal proceeds, minus the asset’s carrying value. 
The journal entries are:
debit
Cash 42,0000
Accumulated Depreciation 40,000
Loss on Asset Disposal 5,000

credit
Machinery 87,000

Answer 2

The journal entry to record the sale would include cash account, accumulated depreciation, loss on the sale of machinery, and machinery account. Cash account, accumulated depreciation, original on the sale of machinery,are debited by $42,000, $40,000, and $5,000, respectively. The machinery account is credited by $87,000.

Further Explanation:

Journal entry:

The journal entry refers to the method of recording the transactions of the business entity in the general journal. The transactions are recorded in accordance with debit and credit balances. All the transactions are recorded according to date and time.

Depreciation:

Depreciation is the cost allocation process in which cost,Cash life of the asset. A long-lived asset is those assets that have a period of life for more than five years. It is an operating expense. Depreciation does not have any impact on cash flow. There are three methods for calculating the depreciation: straight-line method, diminishing method, and units of production method. The real price of the asset cannot, with the help of depreciation.

Disposal of the asset:

It refers to the sale, retirement, or exchange of the plant, property, or equipment. The gain or loss on the disposal of the asset is calculated by deducting sales proceeds from the carrying amount. The carrying amount is calculated as a difference between the cost of the asset and accumulated depreciation.

Journal entry to record the sale of machinery:

Refer to Table: (1) for journal entry.

 

The loss on the sale of machinery can be computed by $87,000-$40,000-$42,000 ($5,000).

Learn more:

1.Learn more about journal entry of purchase

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2.Learn more about depreciation

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3.Learn more about journal entry

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Answer details:

Grade: Middle School

Subject: Accounting

Chapter: Journal Entry

Keywords: Martinez, owns machinery, cost $87,000, sells, cash, journal entry, record, the sales, would include, cash account, accumulated depreciation account, loss on the sale of machinery, machinery.