Question: On 2 January 2015, Gormly Ltd purchased a machine for $165 000. The machine had a useful life of 5 years and a residual value
On 2 January 2015, Gormly Ltd purchased a machine for $165 000. The machine had a useful life of 5 years and a residual value of $5000. Straight-line depreciation is used. The machine is to be disposed of on 1 July 2019. Ignore GST. Gormly Ltd balances its accounts on 31 December.
Required
A. What entry should be made to record depreciation prior to the disposal?
B. Prepare journal entries to record the disposal of the machine under each of the following assumptions:
1. The machine is sold for $80000 cash.
2. The machine is sold for $48500 cash.
3. The machine and cash of $120000 are exchanged for a new machine with a cash price of $140000.
4. The machine was completely destroyed by fire and cash of $45000 was received from the insurance company.
5. The machine and cash of $140000 are exchanged for a new machine with a cash price of $170000.
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