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Disposition of Assets

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Entries: Disposition of Assets

On December 31, 2010, Chrysler Inc. has a machine with a book value of $940,000. The original cost and related accumulated depreciation at this date are as follows.

Machine $1,300,000
(minus)
Accumulated Depreciation $ 360,000
(equals)
Book Value $ 940,000

Depreciation is computed at $72,000 per year on a straight-line basis.

Instructions:

Please indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal.

On July 31, 2011, the company donated this machine to the Mountain King City Council. The fair value of the machine at the time of the donation was estimated to be $1,100,000.

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Solution Summary

The solution explains the journal entries relating to disposition of assets

Solution Preview

The depreciation is recorded till Dec 31, 2010.

First step is to update the depreciation for 7 months of 2011. Total depreciation for the year is 72,000 and so for 7 months it is 72,000/12 X 7 = ...

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