Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 7

Recording and Interpreting the Disposal of Long-Lived Assets
During 2013, Rayon Corporation disposed of two different assets. On January 1, 2011 their disposal, the accounts reflected the following:

The machines were disposed of in the following ways:
a. Machine A: Sold on January 2, 2013, for $33,500 cash.
b. Machine B: On January 2, 2013, this machine suffered irreparable damage from an accident and was removed immediately by a salvage company at no cost.
Required:
1. Give the journal entries related to the disposal of each machine at the beginning of 2013.
2. Explain the accounting rationale for the way that you recorded each disposal.