ACCTSol75.pdf

# 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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• One '14
• Depreciation, Generally Accepted Accounting Principles, net assets, Cr Machine

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