Alpha sells machine B for $50,000 cash on 30 April 20X4. Machine B cost $100,000 when it was purchased and has a carrying value of $65,000 at the date of disposal.
What are the journal entries to record the disposal of machine B?
Dr Non-current assets
$65,000
Dr Accumulated depreciation
$35,000
Cr Cash
$50,000
Cr Profit on disposal (Income statement)
Dr Cash
Cr Non-current assets
$20,000
Dr Loss on disposal (Income statement)
$15,000
Cr Non-current assets - cost
$100,000
The correct answer is:
Using T accounts:
Balance b/d
Plant and machinery disposals a/c
PLANT AND MACHINERY ACCUMULATED DEPRECIATION
Plant and machinery disposals
PLANT AND MACHINERY DISPOSALS
Plant and machinery account
Accumulated depreciation
Cash
I & E a/c (loss on sale)
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