During 2017, Bhumika Company disposed of two different assets. On January 1, 2017, prior to the assets’ disposal, the accounts reflected the following: 

The machines were disposed of in the following ways: 

a. Machine A: This machine was sold on January 2, 2017, for $8,200 cash. 

b. Machine B: On January 2, 2017, this machine suffered irreparable damage from an accident and was removed immediately by a salvage company at no cost. 

Required: 

1. Give the journal entries related to the disposal of each machine at the beginning of 2017.

2. Explain the accounting rationale for the way that you recorded each disposal.

Transcribed Image Text:

Accumulated Original Cost Residual Estimated Depreciation (straight-line) Asset Value Life Machine A $76,200 $4,200 15 years $57,600 (12 years) Machine B 20,000 3,000 8 years 12,750 (6 years)