if a machinery's balance b/d was 200000(debit) and it was sold for 120000, by crediting bank a/c with 120000 and provision for depreciation of 50000 in machinery a/c what will be the balance and on which side, will it be a loss on sale of machinery or ?a profit on a sale of machinery
Question
if a machinery's balance b/d was 200000(debit) and it was sold for 120000, by crediting bank a/c with 120000 and provision for depreciation of 50000 in machinery a/c what will be the balance and on which side, will it be a loss on sale of machinery or ?a profit on a sale of machinery
Solution
The initial balance of the machinery is 200,000 (debit). When the machinery is sold for 120,000, the bank account is credited with this amount. This means that the machinery account is reduced by 120,000.
Next, a provision for depreciation of 50,000 is made in the machinery account. This further reduces the machinery account by 50,000.
So, the calculation will be as follows:
200,000 (initial balance) - 120,000 (sale of machinery) - 50,000 (depreciation) = 30,000 (debit balance)
The machinery account now has a debit balance of 30,000.
Since the machinery was sold for less than its book value (200,000 - 50,000 = 150,000), there is a loss on the sale of the machinery. The loss is the difference between the book value and the sale price, which is 150,000 - 120,000 = 30,000.
So, there is a loss on the sale of machinery of 30,000.
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