Answer:
The journal entries are as follows:
(a) update depreciation for 2021
Depreciation expense A/c Dr. $1,600
To accumulated depreciation - machinery $1,600
(To record the depreciation on machinery till the date of sale)
Workings:
Depreciation expense:
= Depreciation for the year × [(number of month till the date of sale) ÷ 12 months]
= $2,400 × [(8 months) ÷ 12 months]
= $1,600
(b) Record the sale
Cash A/c Dr. $10,500
Accumulated depreciation - machinery A/c Dr. $10,000
To machinery $20,000
To gain on sale of machinery $500
(To record the sale of machinery)
Workings:
Accumulated depreciation as on 01/09/2021:
= Beginning balance + depreciation for the year 2021
= $8,400 + $1,600
= $10,000
Gain on sale of machinery:
= sale value of machinery - Book value of machinery
= $10,500 - (20,000 - 10,000)
= $10,500 - 10,000
= $500
