Zen Co. sells a copier machine for $2,000. The copier cost Zen $6,000 and at the time of sale, accumulated depreciation was $2,500. Zen will record this sale with which of the following entries?Multiple choice question.Credit to Gain on Disposal of Machinery for $3,500.Debit to Loss on Disposal of Machinery for $3,500.Credit to Gain on Disposal of Machinery for $1,500.Debit to Loss on Disposal of Machinery for $1,500.No gain or loss will be recorded.
Question
Zen Co. sells a copier machine for 6,000 and at the time of sale, accumulated depreciation was 3,500.Debit to Loss on Disposal of Machinery for 1,500.Debit to Loss on Disposal of Machinery for $1,500.No gain or loss will be recorded.
Solution
To answer this question, we first need to calculate the book value of the copier machine at the time of sale. The book value is calculated as the original cost of the asset minus the accumulated depreciation.
In this case, the original cost is 2,500. So, the book value of the copier machine is 2,500 = $3,500.
Next, we compare the book value with the sale price. The sale price is 3,500) is higher than the sale price ($2,000), Zen Co. will record a loss on the disposal of the machinery.
The loss is calculated as the book value minus the sale price, which is 2,000 = $1,500.
So, the correct answer is: Debit to Loss on Disposal of Machinery for $1,500.
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