On January 1, 2011, a company purchased a machine for $138,000. In addition, the company paid delivery costs of $1,200 and $4,800 to have the machine installed. At the end of 5 years, the company expects to sell the machine for $11,500. The company uses the double-declining-balance method of depreciation. If the company sells the machine at the end of 5 years and receives $11,000, the journal entry to record the sale will include which of the following?
A) Credit to Machine for $138,000.
B) Debit to Loss on Sale for $500.
C) Credit to Residual Value for $12,000.
D) Debit to Accumulated Depreciation for $138,000.
Total Cost of machine = 138000+1200+4800 = 144000
If total useful life of 5 years, and machine is also selling at the end of 5 years then book value is equal to residual value of machine
So journal entry
| Date | General Journal | Debit | Credit |
| Cash | 11000 | ||
| Accumulated depreciation-machine | 132500 | ||
| Loss on sale of machine | 500 | ||
| Machine | 144000 | ||
So answer is B) Debit to Loss on Sale for $500.
On January 1, 2011, a company purchased a machine for $138,000. In addition, the company paid...