ACCTSol75.pdf - 19 Award 1.00 point Laurel Company...

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19. Award: 1.00 point 20. Award: 1.00 point Laurel Company purchased a new machine on Jan 1, 1995 for $33,000. At the time of acquisition, the machine was estimated to have a useful life of 10 years and an estimated value at the end of the ten years of $3,000. The company has recorded monthly depreciation using the Straight-Line Method. On July 1, 2016, when the net book value of the machine was the machine was $4,500, it was sold for $4,000. The amount which should be recognized from the sale of the machine is: $0 a gain of $1,000 a loss of $500 a gain of $1,500 None of the other alternatives are correct Depreciation = ($33,000 - $3,000)/10 years = $3,000/year x 9.5 years (Jan.1, 1995 to July 1, 2016) = $28,500 Journal Entry: Dr Cash $4,000 Dr Accumulated Depreciation $28,500 *Dr/Cr $* Cr Machine $33,000 *Balancing entry will tell us whether a gain or loss arose on the sale of the machine. Total Debits = $4,000 + $28,500 = $32,500 Total Credits = $33,000 = $33,000 Difference and Balancing Entry = $ 500 A $500 debit is needed to balance the journal entry, thus resulting in a $500 loss.
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