MB replaced a major component of its plant (original cost of the component, $12,000 (60 percent depreciated), with a new component that cost $17,500 in cash. Therefore, MB should make the following entry:

1) Accumulated amortization 7,200

Plant 17,500

Gain on disposal 7,200

Cash 17,500

2) Plant (or accumulated amortization) 17,500

Cash 17,500

3) Accumulated amortization 7,200

Plant 5,500

Loss on disposal 4,800

Cash 17,500

4) Plant 17,500

Loss on disposal 12,000

Plant 12,000

Cash 1,7500

Question

MB replaced a major component of its plant (original cost of the component, $12,000 (60 percent depreciated), with a new component that cost $17,500 in cash. Therefore, MB should make the following entry:

1) Accumulated amortization	7,200
Plant	17,500
Gain on disposal		7,200
Cash		17,500
2) Plant (or accumulated amortization)	17,500
Cash		17,500
3) Accumulated amortization	7,200
Plant		5,500
Loss on disposal		4,800
Cash		17,500
4) Plant	17,500
Loss on disposal	12,000
Plant		12,000
Cash		1,7500

Quizplus · Accepted Answer

The Answer of MB replaced a major component of its plant (original cost of the component, $12,000 (60 percent depreciated), with a new component that cost $17,500 in cash. Therefore, MB should make the following entry:

1) Accumulated amortization	7,200
Plant	17,500
Gain on disposal		7,200
Cash		17,500
2) Plant (or accumulated amortization)	17,500
Cash		17,500
3) Accumulated amortization	7,200
Plant		5,500
Loss on disposal		4,800
Cash		17,500
4) Plant	17,500
Loss on disposal	12,000
Plant		12,000
Cash		1,7500

MB Replaced a Major Component of Its Plant (Original Cost