During the current year, Merkley Company disposed of three different assets. On January 1 of the current year, prior to their disposal, the accounts reflected the following:

During the current year, Merkley Company disposed of three different assets. On January 1 of the current year, prior to their disposal, the accounts reflected the following:
 

Asset	Original Cost		Residual Value		Estimated Life	Accumulated Depreciation (straight line)
Machine A	$	30,000	$	3,000	12 years	$	22,500 (10 years)
Machine B		57,000		4,000	10 years		42,400 (8 years)
Machine C		75,800		6,900	18 years		45,933 (12 years)

 
The machines were disposed of in the following ways:

  
a. Machine A: Sold on January 1 for $7,000 cash.

b. Machine B: Sold on December 31 for $10,000; received cash, $2,200, and a $7,800 interest-bearing (12 percent) note receivable due at the end of 12 months.

c. Machine C: On January 1, this machine suffered irreparable damage from an accident. On January 10, a salvage company removed the machine at no cost.

Required:

1. Give all journal entries related to the disposal of each machine in the current year.

Explanation:

1.
Machine A: 

Depreciation expense for the current year - none recorded because disposal date was January 1.

Machine B:
 

Depreciation expense for the current year, Machine B = ($57,000 – $4,000) ÷ 10 years = $5,300

Accumulated depreciation for the current year, Machine B = ($42,400 + $5,300) = $47,700

Machine C:

Depreciation expense for the current year - none recorded because disposal date was January 1.

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