The entry to record the disposal of a worn out machine with cost of $8,000 and accumulated depreciation of $7,200 includes a credit of $800 to the Loss on Disposal account.

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The entry should include a debit to the Loss on Disposal account because the machine's book value is $800 ($8,000 cost - $7,200 accumulated depreciation), and if it is disposed of without any proceeds, it results in a loss.

The Entry to Record the Disposal of a Worn Out