Diaz Company owns a machine that cost $125,200 and has accumulated depreciation of $93,100. Prepare the entry to record the disposal of the machine on January 1 in each seperate situation. The machine needed extensive repairs and was not worth repairing. Diaz disposed of the machine, receiving nothing in return. Diaz sold the machine for $16,400 cash. Diaz sold the machine for $32,100 cash. Diaz sold the machine for $41,300 cash.

1. Loss on sale of machine = $15,700

2. No Loss or Gain

3. Gain = $9,200

Explanation:

Requirement 1

If Diaz Company disposed the machine with a cash of $16,400, the journal entry to record the transaction of disposal of machine will be as follows:

January 1   Cash                                       Debit        $16,400

                  Accumulated depreciation   Debit        $93,100

                  Loss on sale of machine       Debit        $15,700

                  Machine                                      Credit        $125,200

Calculation:

Book value of the machine = Purchase price - Accumulated depreciation = $(125,200 - 93,100) = $32,100

We know, loss on sale of machine = Book value of the machine - Sale price = $(32,100 - 16,400) = $15,700. Loss is a debit as it is an expense.

Requirement 2

If Diaz Company disposed the machine with a cash of $32,100, the journal entry to record the transaction of disposal of machine will be as follows:

January 1   Cash                                       Debit        $32,100

                  Accumulated depreciation   Debit        $93,100

                  Machine                                      Credit        $125,200

Calculation:

Book value of the machine = Purchase price - Accumulated depreciation = $(125,200 - 93,100) = $32,100

We know, Gain (Loss) on sale of machine = Book value of the machine - Sale price = $(32,100 - 32,100) = $0. As the book value and the disposal value are same, there is no loss and no gain.

Requirement 3

If Diaz Company disposed the machine with a cash of $41,300, the journal entry to record the transaction of disposal of machine will be as follows:

January 1   Cash                                       Debit        $41,300

                  Accumulated depreciation   Debit        $93,100

                  Gain on sale of machine       Credit               $9,200

                  Machine                                      Credit        $125,200

Calculation:

Book value of the machine = Purchase price - Accumulated depreciation = $(125,200 - 93,100) = $32,100

We know, Gain on sale of machine = Sale price - Book value of the machine = $(41,300 - 32,100) = $9,200. Gain is a credit as it shows as the income.

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

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