Explain the accounting rationale for the way in which you recorded each disposal.

Recording and Interpreting the Disposal of Three Long-Lived Assets – During 2011, Rank Company disposed of three different assets. On January 1, 2011, prior to their disposal, the accounts reflected the following:

Asset

Original
Cost

Residual
Value

Estimated
Life

Accumulated
Depreciation
(straight line)

Machine A

$24,000

$2,000

5 years

$17,600 (4 years)

Machine B

16,500

5,000

10 years

8,050 (7 years)

Machine C

59,200

3,200

14 years

48,000 (12 years)

The machines were disposed of in the following ways:

a. Machine A: Sold on January 1, 2011, for $6,750 cash.

b. Machine B: Sold on December 31, 2011, for $7,000; received cash, $2,000, and a $5,000 interestbearing (10 percent) note receivable due at the end of 12 months.

c. Machine C: On January 1, 2011, this machine suffered irreparable damage from an accident and was scrapped.

Required:

1. Give all journal entries related to the disposal of each machine.

2. Explain the accounting rationale for the way in which you recorded each disposal.

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