Diaz Company owns a machine that cost $126,900 and has accumulated depreciation of $92,800. Prepare the entry to record the disposal of the machine on January 1 in each separate situation. 1. The machine needed extensive repairs and was not worth repairing. Diaz disposed of the machine, receiving nothing in return. 2. Diaz sold the machine for $15,800 cash. 3. Diaz sold the machine for $34,100 cash. 4. Diaz sold the machine for $41,800 cash.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Exercise 8-17 (Algo) Disposal of assets LO P2
Diaz Company owns a machine that cost $126,900 and has
1. The machine needed extensive repairs and was not worth repairing. Diaz disposed of the machine, receiving nothing in return.
2. Diaz sold the machine for $15,800 cash.
3. Diaz sold the machine for $34,100 cash.
4. Diaz sold the machine for $41,800 cash.
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