Use the information above to answer the following question.If the company sells the machine at the end of 5 years and receives $11,500,the journal entry to record the sale will include which of the following?
A) Debit to Accumulated Depreciation for $138,000
B) Credit to Machine for $138,000
C) Debit to Loss on Sale for $500
D) Credit to Residual Value for $12,000

Question

Quizplus · Accepted Answer

When a company sells a capital asset such as a machine, the journal entry will involve removing the cost of the asset from the books and recording any gain or loss on the sale. In this case, the company is selling the machine for $11,500, which is less than its carrying value on the books of $12,000 (original cost of $150,000 minus accumulated depreciation of $138,000). This means the company will incur a loss on the sale, which should be recorded with a debit to Loss on Sale. None of the other answer choices are necessary for this journal entry.

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