In early 2015,Plattsville Plastics recently decided to dispose of an extrusion machine.The original cost was $460,000 and accumulated depreciation was $310,000.At that time,the machine was retired from operations,the book value of the machine approximated its fair value.On December 31,2016,the fair value of the machine was determined to be $110,000.Which of the following would be included in a related adjusting entry on December 31,2016.

Question

Quizplus · Accepted Answer

Since the fair value ($110,000) is less than the book value ($150,000), there is a loss on disposal. The loss is calculated as the difference between the fair value and the book value, which is $150,000 - $110,000 = $40,000. Therefore, the adjusting entry should include a debit to Loss on Machine Held for Disposal for $40,000.

In Early 2015,Plattsville Plastics Recently Decided to Dispose of an Extrusion