On January 1,2018,Manzanita Manufacturing purchased a machine for $345,000 with an expected life of 5 years and a residual value of $37,500.In addition,the company paid delivery costs of $3,000 and $12,000 to have the machine installed.Manzanita uses the double-declining-balance method of depreciation. If the company sells the machine at the end of 5 years and receives $28,750,the journal entry to record the sale will include which of the following?
A)Debit to Accumulated Depreciation for $345,000.
B)Credit to Machine for $345,000.
C)Debit to Loss on Sale for $8,750.
D)Credit to Residual Value for $30,000.

Question

Quizplus · Accepted Answer

The machine is fully depreciated,so its book value equals the residual value.
Gain (loss)on disposal = Proceeds from sale − Book value at time of sale
= $28,750 − $37,500 = ($8,750)
Debit Cash $28,750,debit Accumulated Depreciation $322,500 (or Cost of $360,000 − Residual Value of $37,500),debit Loss on Disposal of PPE $8,750,credit Machine $360,000 (or ($345,000 + $3,000 + $12,000)

On January 1,2018,Manzanita Manufacturing Purchased a Machine for $345,000 with an Expected