Question

journal entries

Make entries for the following two transactions: a. Sell a machine with an original cost of $10,000, and accumulated depreciation of $8,000, for cash of $3,000. b. Sell a building with an original cost of $10 million, and accumulated depreciation of $2 million, for $5,500,000 in cash.

Answer 1

(a)-The Journal entry to record the sale of Machinery

Accounts Tittles and Explanations	Debit ($)	Credit ($)
Cash A/c	3,000
Accumulated Depreciation – Machinery A/c	8,000
To Machinery A/c		10,000
To Gain on sale of Machinery A/c		1,000
[Being the journal entry passed to record the sale of Machinery]

Gain on sale of machinery = Sale Value - Book Value

= Sale Value – [Original cost – Accumulated depreciation]

= $3,000 – [$10,000 - $8,000]

= $3,000 - $2,000

= $1,000

(b)-The Journal entry to record the sale of Building

Accounts Tittles and Explanations	Debit ($)	Credit ($)
Cash A/c	5,500,000
Accumulated Depreciation – Building A/c	2,000,000
Loss on sale of Building A/c	2,500,000
To Building A/c		10,000,000
[Being the journal entry passed to record the sale of Building]

Loss on sale of Building = Sale Value - Book Value

= Sale Value – [Original cost – Accumulated depreciation]

= $55,000,000 – [$10,000,000 - $2,000,000]

= $5,500,000 - $8,000,000

= -$2,500,000 [Loss]