Jayco purchased a machine for 6000 with the salvage value of 400 and a life of seven years the Straight-line method of depreciation was used At mid-year in year 4 Jayco sold the machine for 450?

Answer 1

Annual depreciation = 6000 - 400 / 7 = 800

Annual depreciation for 3.5 years = 2800

Journal entry for sale of asset

Debit Accumulated Depreciation 2800

Debit Cash 450

[Debit] Loss on sale of asset 2750

Credit Asset 6000

Answer 2

The annual depreciation expense is (6000-400)/7 = $828.57. By year 4, accumulated depreciation would be 828.57 * 3.5 = $2899.99. Therefore, the book value at the time of sale is 6000 - 2899.99 = $3100. Since the machine was sold for $450, Jayco incurred a loss of $3100 - $450 = $2650.