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.On December 31,2017,the fair value of the machine was determined to be $160,000.Which of the following would be included in a related adjusting entry on December 31,2017?

Question

Quizplus · Accepted Answer

The adjusting entry on December 31, 2017, would involve increasing the gain on the machine held for disposal to reflect the increase in fair value from $110,000 to $160,000. This would result in a credit to Gain on Machine Held for Disposal. The amount of the credit would be equal to the difference between the fair value on December 31, 2017 and the book value of the machine (which was already written down to its fair value on the retirement date), so the correct credit amount is $40,000 (=$160,000 - $120,000). Therefore, the answer is C.

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