Question

On December 31, 2020. Monty Inc. has a machine with a book value of $1,109,200. The original cost and related accumulated depreciation at this date are as follows. Machine Less: Accumulated depreciation Book value $1,534,000 424.800 $1,109.200 Depreciation is computed at $70,800 per year on a straight-line basis. Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal. A fire completely destroys the machine on August 31, 2021. An insurance settlement of $507,400 was received for this casualty. Assume the settlement was received immediately. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry"for the account titles and enter for the amounts) Date Account Titles and Explanation Debit Credit August 31, 2021 (To record current depreciation) August 31, 2021 (To record loss of the machine.)

Answer 1

Situation 1
Date	Account title and Explanation	Debit	Credit
31-Aug-21	Depreciation expense (70,800*8/12)	$47,200
	Accumulated depreciation - Machine		$47,200
	(To record current depreciation)
31-Aug-21	Cash	$507,400
	Accumulated depreciation (424,800+47,200)	$472,000
	Loss of machine due to fire	$554,600
	Machine		$1,534,000
	(1534000-507400-472000)
	(To record loss of the machine)
Situation 2
Date	Account title and Explanation	Debit	Credit
1-Apr-21	Depreciation expense (70,800*3/12)	$17,700
	Accumulated depreciation - Machine		$17,700
	(To record current depreciation)
1-Apr-21	Cash	$1,227,200
	Accumulated depreciation (424,800+17,700)	$442,500
	Gain on sale of machine		$135,700
	Machine		$1,534,000
	(1227200+442500-1534000)
	(To record sale of machine)
Situation 3
Date	Account title and Explanation	Debit	Credit
31-Jul-21	Depreciation expense (70,800*6/12)	$35,400
	Accumulated depreciation - Machine		$35,400
	(To record current depreciation)
31-Jul-21	Contribution expense	$1,298,000
	Accumulated depreciation (424,800+35,400)	$460,200
	Gain on sale of machine		$224,200
	Machine		$1,534,000
	(1298000+460200-1534000)
	(To record donation of the machine)